Question

Which of the following statements are true?

The cost of production will increase if

1. The government gives subsidies
2. The firm uses obsolete technology
3. The price of diesel increases

Options

• only (i) and (ii)

• only (ii) and (iii)

• only (i) and (iii)

• All (i), (ii) and (iii)

Answer 1

only (ii) and (iii)

Explanation:

1. The government gives subsidies: This statement is false. Subsidies typically reduce the cost of production because the government is providing financial assistance to the firm.
2. The firm uses obsolete technology: This statement is true. Using outdated or inefficient technology can increase the cost of production because it may require more inputs or result in lower productivity.
3. The price of diesel increases: This statement is true. An increase in the price of diesel would raise the cost of production, especially for firms that rely on transportation or machinery powered by diesel.