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There are following types of capital:

1.Fixed Capital : It exists in durable shape, i.e. machines.

2. Circulating Capital : It is used for production in a single-time use, i.e. raw material.

3. Real Capital : Investment in physical goods , i.e. plant and machinery, building.

4. Human Capital : It represents capital existing in the form of human skill and ability.

5. Tangible capital : It can be touched or seen, i.e. plant and machinery.

6. Intangible capital : Existing in the form of rights and benefits, he. goodwill, patent.

7. Individual capital: It refers to the personal property of an individual or a group.

8. Social capital : It belongs to the society in the form of roads, bridges.

There are mainly three stages of capital formation, which are given below:
(i) Savings : The basic factor on which capital is created is savings. The ability to save depends on the income of a person. Higher savings generally follow higher earnings. A rich country has more potential than a poor country and can get rich from it soon. It is not only the ability to save, but also the desire to save, which is of great importance. Desire depends on the person’s concern about his future as well as the social order in which he lives.

(ii) Mobilization of Savings : It is not enough that people want to save money, what is essential is that the saved money enters circulation and facilitates the process of capital formation. To collect public savings, banking and other financial institutions should have a broad network and their services should be accessible to the potential investor.

(iii) Investment: The process of capital formation is completed, when the actual savings are converted into real capital assets. There should be an entrepreneurial class of an economy that is ready to bear the risk of business and to utilise savings in productive opportunities so that it can create new capital assets.

The following are the functions of an entrepreneur :
(i) To Initiate a Business Venture and Coordination : The first and most important task of the entrepreneur is to start the business by collecting various factors of production. Entrepreneurs pay costs for various factors of production, remuneration for their services, and that which is surplus, is the factor payment that they receive. If there is no extra balance, then they do not get any factor payment.

(ii) Risk Bearing and Uncertainty : Many economists have emphasized that the most significant task of an entrepreneur is to bear the risk and uncertainty. According to F.H. Knight, certain risks (Insurable risks) like risks of fire, thefts and accidents, etc. do not cause uncertainty and thus do not give rise to profits. It is non-insurable risks (like risks relating to price decision, output decision, and product variation decision, etc.) that involve uncertainty and give rise to profits.

(iii) Innovation : It is the true function of the entrepreneur. In broad sense, innovation includes introduction of new production methods, utilization of new sources of raw materials, adoption of new forms of organization, introduction of new products and discovering new markets.

(d) All of the above

1. Cross breeding is the mating between animals of different breeds. It involves mating of superior males of one breed with superior females of another breed.

2. This method allows the desirable qualities of two different breeds to be combined. Thus the hybrid progeny will have desirable traits of both the breeds.

3. Eg-Hisardale is a new breed of sheep developed by crossing Bikaneri ewes and Marino rams.

Relationship between AP and MP:

1. Both AP and MP can be calculated by Total Production..
2. When AP rises, then MP also rises but MP > AP.
3. When AP is maximum then MP = AP, or say, MP curve cuts the AP curve at its maximum point.
4. When AP falls, then MP also falls but MP < AP.
5. There may be a situation when MP decreases and AP increases but opposite never happens.
6. MP can be zero or negative, but AP can never be zero or negative.

(d) The price of the firm’s output

Scale means a particular unit like metre, litre, kilogram, yard, feet or area of land in bigha, acre, hectare, etc.

(d) AFC = ATC – AVC

(a) at least one fixed factor of production and firms neither leaving nor entering the industry

Fixed input is one whose supply is inelastic in the short-run and is used in fixed quantity in the short-run.

The relationship between marginal and total production is an below :

1. When MP increases, TP also increases.
2. When MP is zero, TP is maximum.
3. When MP is negative, TP begins to decline.

(c) The MC curve intersects the ATC curve at minimum ATC

(d) when marginal product is at a maximum, average product equals marginal product, and total product is rising

Correct answer is (a) zero

Marginal production is additional output attributed to an additional unit of the variable factor, other factors remaining constant.

When MP is zero, there is not addition to TP. Hence, TP is maximum at this point.

TP means total product or sum total of output produced by all the units of a variable factor used in the process of production along with some amount of the fixed factors.

MP means marginal product. It is additional output attributed to an additional unit of the variable factor, other factors remaining constant.

An output is any good or service that comes out of production process. An output may be tangible or intangible.

(a) The average product is at its maximum when marginal product is equal to average product.

Correct answer is (a) labour

Average production of a factory is the total output produced per unit of a factor divided by the units of a variable factors. Thus,
Average production = Total production/Number of Units of a Factor Employed.

(d) All of these

(b) the additional output resulting from a one unit increase in the variable input.

Total output product can be calculated from the following steps:

1. By summation of output of different units of factors.
2. By multiplying average product with units of factors of production.
3. TP = ∑MP.
4. Or TP = AP_x units of factors of production.

Meaning : According to the law of variable proportions, when more and more units of a variable factor are mixed with the same amount of fixed factors, the total production increases at a rising rate, and then the rate decreases eventually. This means that marginal production increases first and then eventually decreases. The law of variable proportions is also known as the law of Factor of return. This is a short-term concept. In essence, when the production due a factor is sought to grow through a specific quantity of fixed factors in addition to the variable factors, then the law of variable proportions comes in operation. The ratio between the fixed factors and the variable factor varies, when variation is only in one factor, while retaining other factors as constant.

Definitions
(i) According to P.A. Samuelson, “An increase in some inputs relative to other fixed inputs will, in a given state of technology, cause output to increase; but after a point, the extra output resulting from the same additions of extra inputs will become less and less.”

(ii) According to G. Stigler, “As equal increments of one input are added; the inputs of other productive services being held constant, beyond a certain point the resulting increments of product will decrease, i.e., the marginal production will diminish.”

(iii) According to F. Benham, “As the proportion of one factor in a combination of factors is increased, after a point, first the marginal and then the average production of that factor will diminish,”

(iv) According to Mrs. Joan Robinson, “The law of diminishing returns, as is usually formulated, states that with a fixed amount of any one factor of production, success in increase in the amount of other factor will, after a point, result into a diminishing increment rate of output.”

It is obvious from the above definitions of the law of variable proportions (or the law of diminishing returns) that it refers to the behaviour of output as the quantity of one factor is increased, keeping the quantity of other factors fixed and further it states that if more units of a variable input are applied to a given quantity of fixed inputs, the total output may initially increase at an increasing rate, but beyond a certain level of output, the rate of increase in the total output diminishes. Precisely, the marginal increase in the total output eventually decreases when additional emits of variable factors are applied to a given quantity of fixed factors.

The law of variable proportion is based on the fact that not all factors of production can be replaced for each other. And it is a noted economic fact that the elasticity of replacement among the various factors is not infinite.

(i) Land : The meaning of land is not the soil alone or the surface of the Earth, but it refers to all the free gifts of nature, in which in addition to land, in common language, natural resources, water, air, light, heating, mines and soil fertility is included. Land cannot be shifted from one place to other like labour and capital. Land is limited and of varying fertility.

(ii) Labour : Labour is a physical or mental effort of human being in the process of production for economic purpose. Any work done for the sake of pleasure or love does not represent labour in economics. It is directly connected with human efforts. The workers’ efficiency differs from one worker to other.

Organisation is an important means of production. It is also called management. Production is organised with the help of management and technology, and taking help of specialists, the organisation of production is done on a large scale. Skilled persons in field of production, and efficient management professionals are employed along with technical experts in the process of production. Organisation is called the heart of production due to its importance, especially in properietary and partnership corporations, organisation is used efficiently to build the most favourable structure. By using organisation in a better way, both the output and quality of production can be increased and improved to the maximum.

Factors of production imply the factors and services used in the process of production. 

These factors can be classified as :

1. Land
2. Labour
3. Capital
4. Entrepreneurship.

A variable input is defined as one whose supply in the short-run in elastic, e.g. labour and raw material, etc.

The production of goods and services requires the use of various production factors. The quantity of production depends on the supply of various factors of national income generation and their productivity. Since economic growth occurs in the total production expansion, therefore the production and efficiency of factors is important for the process of economic development.

(i) Land : The term ‘land’ has been given a special meaning in economics. It does not mean soil, as in the ordinary speech, but it is used in a much wider sense. Land stands for all natural resources which are useful and scarce, actually or potentially. Land is an inactive means of production. Land includes all things obtained free of cost from nature, i.e. land, oceans, mountains, etc. Land is limited and it is a necessary and fundamental means of production. Its fertility varies.

(ii) Labour : Any work whether manual or mental which is done in exchange for some reward is called Labour. So, in terms of economics, professors, teachers, doctors and singers are as much labourers as the ordinary workers. Therefore, the essential condition for a work to be called Labour is that it should be done for a payment or monetary consideration.

It is a perishable factor and it cannot be possible to store the labour for future utilization. If the person or worker does not get employment for some days, then the time so lost cannot be recovered.

(iii) Capital : Capital implies that property which is used to earn money. E.g. raw material, building, machines, equipment, etc.

(iv) Management and Technology : Management and technology or organisation is also an important means of production. With its help, various means of production are arranged in appropriate quantity and coordination is established between them. Now-a-days production is done on very large scale, due to which the importance of this factor has increased greatly.

(v) Entrepreneurship : The entrepreneur owns entrepreneurship. He is that man of production who takes decisions and bears risk. He has also been called the Organizer, the Manager or Risk-taker. The first and foremost function of an entrepreneur is to start a business by collecting various factors of production. Entrepreneur pays remuneration for the various factors of production, remuneration for their services. Whatever surplus is left, is his factor payment. If there is no surplus left, he gets no factor payment.

According to law of variable proportions, as more and more units of a variable factor are combined with same quantity of fixed factors, total production first increases at an increasing rate, then at diminishing rate, and finally starts diminishing. It implies that marginal product first rises and then diminishes eventually. Law of variable proportions is also known as Law of Returns to a Factor. It is a short-terin concept.

(c) output will increase by less than 10%

Rational stage of production is that when in given cost conditions, the producer maximizes his production. Alternately, the cost of production may be minimum for a given output. This rational stage of production is called Producer’s equilibrium.

As of September 2016, there have been 101 (latest of List Bill) amendments to the Constitution of India, since it was first enacted in 1950.

This situation arises when excessive quantities of variable factors adversely affect the efficiency of a fixed factor. The proverb “too many cooks spoil the broth” aptly applies to this situation. In this stage, the quantity of variable factors becomes too excessive relative to the fixed factors so that they get in each other’s way with a result that the total output falls instead of rising. In such a situation, a reduction in the units of the variable factors will increase the total output. It is called the Stage of Negative Returns.

• Difficult to tamper/cheat
• Cost effective and economical
• Time saving
• Calculation is faster
• Easy to use / carry / transport
• Data can be saved for later use.

As the amount of a variable factor continues to increase with a constant quantity of the other fixed factors, a stage is reached when the total product declines and the marginal . product becomes negative. This phenomenon of negative returns in stage 3 is due to the fact that the quantity of the variable factors becomes too excessive relative to the fixed factors so that they obstruct each other with the result that the total output falls instead of rising.

Besides, too large a number of the variable factors also impairs the efficiency of the fixed factors. The proverb “too many cooks spoil the broth” aptly applies to this situation. In such a situation, a reduction in the units of the variable factors will increase the total output. Just as in the first stage, marginal product of the fixed factors is positive due to its limitedness, in the third stage, the marginal product of the variable factors is negative due to its excessiveness.

• Difficult to tamper/cheat
• Cost-effective and economical
• Time-saving
• Calculation is faster
• Easy to use / carry / transport
• Data can be saved for later use.

Merits of an independent judicial system:

• The judicial system enables the courts to give impartial judgements.
• Judiciary does not act under any political pressure.
• As the judges are appointed by the President and not by the Government.

Demerits of an independent judicial system:

• As the judiciary is independent, it is out of the scope of the government’s control.
• The judiciary is not answerable to anyone if the process of dispensing justice is slow.

Daman and Diu, New Delhi

(c) MPC + MPS = 1

This theory is a short-term analysis.

The level of employment is affected by the change in investment. Higher level of employment can be achieved by higher investment.

According to Keynes, by increasing the effective demand, unemployment can be reduced and level of absolute employment can be achieved.

According to Keynes, level of income and employment depends upon the effective demand of a country during a certain time period.

(i) The Judiciary of India is independent machinery according to the provisions of the Constitution.

(ii) It is separate from the Executive and Legislative bodies of the Indian Government.

(iii) The Supreme Court is the guardian of the Constitution which ensures that the Fundamental Rights of the citizens are not violated.

(iv) To carry out its duties without fear or favour or external pressure, the Judiciary in India is independent.

The Council of Ministers.