Question One [25]

Explain whether the following statements are true or false. (Only correct explanations will fetch you marks).

i. The law of diminishing returns is not applicable in the long run.

ii. A resource constrained producer can still maximize profit in stage 1 of the production processes.

iii. Marginal physical product is directly related with the marginal cost.

iv. If a production function exhibits increasing returns to scale, the producer should utilise less of the scarce resources in order to maximize profit.

v. Profit maximization and cost minimization are different goals that can be pursued by a producer.

vi. The long-run is a planning horizon during which production can as well take place.

vii. Inability to benefit from bulk purchases can lead to increase in the cost of production in small scale agriculture.

viii. The marginal cost curve is not related to output supply function in the short run.

ix. In the very short run, supply curve can either be perfectly elastic or perfectly inelastic.

x. Isoquantis the locus of various allocatively efficient combinations of two variable inputs which would produce a given level of output Q₀.

xi. There are infinite number of ridge line in Isoquants.

xii. An isocline is not in any way related to the ridgeline.

xiii. Producer can profitably operate even if his production function is homogenous to a degree zero (0).

xiv. Profit can still be maximized in the long run if the producer realizes different revenues or returns from investment of R1 in the production of two different products.

xv. In the short run, producers minimizes production cost when the selected inputs have zero opportunity cost across all the enterprises.