Discounted Cash Flow Techniques (NPV, BCR, IRR, Net Benefit-Investment Ratio) & Network Scheduling (PERT/CPM) - Agricultural Economics | Agrigyan

• Characteristics of Ordinary Farm Partnerships:
• In an ordinary general partnership:
• Capital and Management: All general partners contribute capital and have the legal right to participate actively in day-to-day operations and farm management.
• Unlimited Liability: All partners possess unlimited, joint, and several liability for all debts and obligations incurred by the business.
• Distractors:
• Statement (C) describes a sleeping / dormant partner, not the definition of an ordinary general partnership.
• Statement (D) incorrectly asserts limited liability, which exists only in Limited Liability Partnerships (LLPs), not ordinary partnerships.
• Conclusion: Statements (A) and (B) only, corresponding to Option 3.

Correct option: (3) (A) and (B) only.

• Effect of Input Price Increase on Firm's Cost Function:
• If the market price of an input increases ($w_i' \gt w_i$):
• To produce any given target output level, the cost of utilizing that input rises.
• The total cost curve shifts upward proportionately to the current cost incurred / input intensity used to produce that specific output level.
• The shift is not a parallel vertical shift because higher output levels require greater quantities of the input, causing total cost to increase by larger absolute amounts at larger scales of production.

Correct option: (3) Shift it up proportionately to the current cost incurred to produce a given output level

• Properties of Production Function:
• Short-run production function: Assumes capital/technology are fixed while labor is the variable input governed by the law of variable proportions. (Correct)
• Returns to Scale in Cobb-Douglas: For $Q = A L^\alpha K^\beta$, if $\alpha + \beta \gt 1$, the function displays increasing returns to scale ($IRTS$). (Correct)
• Marginal Product of Capital ($MP_K$): Differentiating with respect to $K$ yields $MP_K = \frac{\partial Q}{\partial K} = \beta \frac{Q}{K}$. (Correct)
• Statement (C) is erroneous as $MRTS_{L,K} = \frac{MP_L}{MP_K} = \frac{\alpha K}{\beta L}$.
• Conclusion: Statements (A), (B), and (D) are correct, corresponding to Option 2.

Correct option: (2) (A), (B) and (0) only,

• Output Price Effect on Marginal Revenue and Optimal Output:
• Assertion (A) is true: In a competitive market, marginal revenue equals market price ($MR = P$). A decline in the market price of the product immediately decreases the marginal revenue associated with every level of output.
• Reason (R) is false: The profit-maximizing firm operates where $P = MC$. Because the Marginal Cost ($MC$) curve is upward-sloping in Stage II, a drop in output price forces the firm to reduce production to a lower output level to restore the condition $P = MC$. A decrease in price decreases, not increases, the optimum output level.
• Conclusion: (A) is true but (R) is false, corresponding to Option 3.

Correct option: (3) (A) is true but (R) is false