Question

Variable proportions type production function exists:

(a) when with change in the level of output there is change in factor ratio

(b) when it is possible to increase output by increasing the application of the variable factor

(c) when scale of production changes with change in the level of output

(d) both (a) and (b)​

Answer 1

Answer:

I think both a and b

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Answer 2

Option d is the correct answer.

Variable proportions type production function exists:

1. when with change in the level of output there is change in factor ratio
2. when it is possible to increase output by increasing the application of the variable factor

As per law of variable proportions when quantity of variable factor is increased by keeping all the other factors constant then the production will

• initially increase at an increasing rate
• then increase at diminishing rate
• and then start falling after reaching its maximum.

1. This is due to decline in the marginal product of the variable factor.
2. So obviously when variable factor is increase the factor ratio will change with the change in output level and with increased application of variable factor the out will also increase.