Question

Given below are two statements:
Statement I: The selling price must be less than the variable cost of producing each unit of product in short run, if farming is to be carried on.
Statement II: Sociology provides information on human motivation and attitudes towards new techniques of agricultural production and their adoption.
In the light of the above statements, choose the most appropriate answer from the options below:

• A. Both Statement I and Statement II are correct
• B. Both Statement I and Statement II are incorrect
• C. Statement I is correct but Statement II is incorrect
• D. Statement I is incorrect but Statement II is correct

Hint:

The "Short-Run Shutdown Rule" states that a firm should produce only if Price $\geq$ AVC. If Price $<$ AVC, the firm minimizes its losses by shutting down.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Firms must decide when to shut down or continue operating in the short run based on price-cost relationships.
Additionally, understanding social structures and human behavior is key to facilitating agricultural technology adoption.

Step 2: Detailed Explanation:
Let us evaluate each statement:
- Statement I: In the short run, a farm should continue operating as long as the selling price is greater than or equal to the Average Variable Cost (AVC) per unit. If the price falls below AVC, the firm should shut down immediately to avoid incurring losses larger than its fixed costs. Thus, Statement I is incorrect.
- Statement II: Rural sociology provides deep insights into human motivations, social barriers, community values, and attitudes, which directly affect how farmers perceive and adopt modern agricultural practices. Thus, Statement II is correct.
Therefore, Statement I is incorrect but Statement II is correct.

Step 3: Final Answer:
The correct option is (D).