ICAR AIEEA-PG (Master's admission and PG scholarship) · India · National Testing Agency for ICAR
Original practice questions written to the published syllabus · not past papersThe economics of turning inputs into farm output: production functions, the three basic relationships, optimum input use, efficiency, scale and risk.
In the exams: agricultural master's entrance examinations, factor-product relationships (heavy); agricultural economics PhD entrance and fellowship examinations, production economics (heavy); agricultural scientist eligibility tests (heavy)
ICAR AIEEA-PG Group 06 (Agricultural Economics), Unit III
The three relationships and which question each answers; TPP, APP, MPP and elasticity of production; stages of production and where the rational stage lies; MVP = MFC and MC = MR as the optimum; isoquant and PPC properties; types of enterprise relationship. One-step numericals from a response schedule or a quadratic.
How our questions for ICAR AIEEA-PG spread across the units of Agricultural Production Economics. Difficulty: 36 easy, 35 medium, 0 hard.
| Factor-product relationship | 7 | |
| Optimum input use: MVP equals MFC | 7 | |
| Product-product relationship | 7 | |
| Types of risk and enterprise combination under risk | 7 | |
| Forms of production function and their estimation | 6 | |
| Law of variable proportions and the three stages of production | 6 | |
| Scope of production economics compared with farm management | 5 | |
| Factor-factor relationship | 5 | |
| Cost minimisation | 5 | |
| Isoquants and isoclines | 4 | |
| Economies of scale and size | 4 | |
| Technical and allocative efficiency and production frontiers | 3 | |
| Technological change | 3 | |
| Theory of the family farm | 2 |
Choose an answer, then open the working. Each explanation says why the right answer is right and why the others are not.
Using the same schedule (0 units: 0 q, 1 units: 10 q, 2 units: 26 q, 3 units: 40 q, 4 units: 50 q, 5 units: 56 q, 6 units: 58 q, 7 units: 57 q), the average physical product at 5 units of input is
B. 11.2 q
APP = TPP/X = 56/5 = 11.2 q. 6 q is the MPP of the 5th unit (56 - 50), and 9.67 q is APP at 6 units.
Further reading: Debertin, Agricultural Production Economics
Why does a rational farmer not operate in stage I for the variable input?
A. Because APP is still rising, so if it pays to use the input at all, it pays to use more
In stage I Ep > 1: each unit adds more than the average, so returns per unit of input are increasing and more input raises profit per unit. TPP falling and negative MPP describe stage III, not stage I.
Further reading: Debertin, Agricultural Production Economics
A resource-use-efficiency study finds the ratio MVP/MFC for fertiliser is 1.8. The correct interpretation is that fertiliser is
D. under-used, and increasing its use would raise profit
A ratio above one means the last unit returns more than it costs, so more should be used until the ratio falls to one. A ratio below one indicates over-use. Stage III would give a negative MVP and so a negative ratio.
Further reading: Heady and Dillon, Agricultural Production Functions
The expansion path is the
D. isocline along which MRTS equals the input price ratio
Every point on the expansion path is a least-cost point for its output at the given prices. Ridge lines are the boundaries of the economic region; the expansion path is one particular isocline within it.
Further reading: Debertin, Agricultural Production Economics
A stochastic frontier estimate shows that a farm could produce 60 q with its inputs, but it produces 42 q. Its output-oriented technical efficiency is
A. 0.7
TE = observed/frontier = 42/60 = 0.7. 0.3 is the inefficiency (the proportion of potential output lost); the inverse 1.429 is the Farrell output-expansion measure (the factor by which output could be raised), not an efficiency score. 18 is the output lost in quintals, not a ratio.
Further reading: Coelli, Rao, O'Donnell and Battese, An Introduction to Efficiency and Productivity Analysis
Hicks-neutral technical change is one that
D. raises both marginal products in the same proportion, leaving the MRTS unchanged at a given input ratio
Hicks (1932) defined neutrality by an unchanged MRTS at a constant input ratio: isoquants move inward without changing shape. Raising MP of labour relatively more would be capital-saving (labour-using) change.
Further reading: Hicks, The Theory of Wages (1932)
Tractors and combine harvesters are examples of technology that is mainly
B. labour-saving
Mechanical technology raises output per worker and substitutes capital for labour, so it is labour-saving (capital-using). Improved seed and fertiliser are the classic land-saving (biological-chemical) technologies.
Further reading: Hayami and Ruttan, Agricultural Development
For a risk-averse decision maker, the certainty equivalent of a risky prospect is
D. less than its expected monetary value
A concave utility function means the sure sum giving the same utility is below the expected value; the gap is the risk premium. Equality holds only for risk neutrality.
Further reading: Hardaker, Lien, Anderson and Huirne, Coping with Risk in Agriculture
In Chayanov's theory of the peasant family farm, the family applies its labour until
B. the marginal drudgery of work equals the marginal utility of the extra consumption
Chayanov's family does not pay itself a wage; it balances the disutility of extra work against the benefit of extra consumption. Setting MVP of labour to the wage is the capitalist (separable) rule.
Further reading: Chayanov, The Theory of Peasant Economy
Schultz's argument in Transforming Traditional Agriculture (1964) is summarised as
C. traditional farmers are poor but efficient, so growth needs new technology, not reallocation
Schultz held that farmers allocate traditional inputs efficiently, so gains must come from new, more productive inputs. The claim that farmers are price-unresponsive is what he rejected.
Further reading: Schultz, Transforming Traditional Agriculture (1964)
Ten here, 71 in the app. The Laisha app has every practice question we have written to ICAR AIEEA-PG in this subject, marked as you go, with timed papers, a jump-to-unanswered list and a certificate when you pass at 70 per cent.
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