Average And Total Cost Mcqs for Preparation

If as the quantity produced increase a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will ?

A. be flat (horizontal)
B. slope upward
C. slope downward
D. be U-shaped.

When marginal costs are below average total costs ?

A. average fixed cost is rising
B. average total cost is falling
C. average total cost is raising
D. average total cost is minimized

Which of the following statements is true ?

A. All costs are fixed in the short run.
B. All costs are variable in the long run
C. All costs are variable in the short run
D. All costs are fixed in the long run

If a production function exhibits diminishing marginal product. its slope ?

A. is linear (a straight line)
B. becomes steeper as the quantity of the input increase
C. could be any of these answers
D. becomes flatter as the quantity of the input increase

Naila owns a small pottery factory. She can make 1000 pieces of pottery per year and sell them for Rs 100 each. It costs Naila Rs 20,000 for the raw materials to produce the 1,000 pieces of pottery She has invested Rs100,000 in her factory and equipment: Rs50,000 from her savings and Rs50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 her per cent, too) Naila can work at a competing pottery factory for Rs40,000 per year. The economics profit at Naila’s pottery factory is ?

A. Rs80,000
B. Rs30,000
C. Rs75,000
D. Rs70,000

Economic profit is equal to total revenue minus ?

A. variable costs
B. implicit costs
C. explicit costs
D. marginal costs

The efficient scale of production is the quantity of output that minimizes ?

A. average fixed cost
B. average total cost
C. average variable cost
D. marginal cost

In the long run, if a very small factory were to expand its scale of operations it is likely that it would initially experience ?

A. an increase in average total costs
B. diseconomies of scale
C. economies of scale
D. constant returns to scale

If marginal costs equal average total costs ?

A. average total cost is falling
B. average total cost is raising
C. average total cost is maximized
D. average total cost is minimized

Which of the following is a variable cost in the short run ?

A. rent on the factory
B. wages paid to factory labor
C. interest payments on borrowed financial capital
D. payments on the lease for factory equipment
E. salaries paid to upper management

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