MCQ on Production and Costs
16-When a proportional increase in all inputs results in an increase in output by a smaller proportion, the production function is said to display
(A) Decreasing Returns to Scale (DRS)
(B) Increasing Returns to Scale (IRS)
(C) Constant returns to scale (CRS)
(D) None of the above
17-When a proportional increase in all inputs results in an increase in output by a larger proportion, the production function is said to display
(A) Decreasing Returns to Scale (DRS)
(B) Increasing Returns to Scale (IRS)
(C) Constant returns to scale (CRS)
(D) None of the above
18-For every level of output, the firm chooses the
(A) maximum cost input combination
(B) least cost input combination
(C) maximum cost output combination
(D) least cost output combination
19-Total cost =
(A) Total variable cost
(B) Total fixed cost
(C) Total variable cost + Total fixed cost
(D) Total variable cost – Total fixed cost
20-At zero level of output, Total cost =
(A) Total variable cost
(B) Total fixed cost
(C) Total variable cost + Total fixed cost
(D) Total variable cost – Total fixed cost
21-Average fixed cost (AFC) =
(A) Total Fixed cost / unit of output
(B) Total Variable cost / unit of output
(C) Total cost / unit of output
(D) None of the above
22-Average variable cost (AVC) =
(A) Total Fixed cost / unit of output
(B) Total Variable cost / unit of output
(C) Total cost / unit of output
(D) None of the above
23-Short run average cost (SAC) =
(A) Total Fixed cost / unit of output
(B) Total Variable cost / unit of output
(C) Total cost / unit of output
(D) None of the above
24-Short run marginal cost (SMC) =
(A) change in total cost / change in output
(B) change in total cost / change in input
(C) change in total variable cost / change in output
(D) change in total fixed cost / change in output
25-Marginal cost is undefined at ___ of output.
(A) zero
(B) one
(C) two
(D) three
26-___ is the increase in Total variable cost (TVC) due to increase in production of one extra unit of output.
(A) fixed cost
(B) marginal cost
(C) variable cost
(D) average cost
27-Total fixed cost
(A) increases with the increase in production
(B) decreases with the increase in production
(C) remains constant for all levels of production
(D) none of the above
28- In the long run, all inputs are
(A) variable
(B) constant
(C) depends upon the units of production
(D) none of the above
29-Which of the following graph curves are U-shaped?
(A) Average variable cost (AVC)
(B) Long run marginal cost (LRMC)
(C) Long run average cost (LRAC)
(D) All of the above
ANSWERS:
16-(A), 17-(B), 18-(B), 19-(C), 20-(B), 21-(A), 22-(B), 23-(C), 24-(A), 25-(A), 26-(B), 27-(C), 28-(A), 29-(D)