Chapter 5 : Cost of Production | Multiple Choice Questions [1 Mark each]
1. The earning of a factor of production from an alternative use is known as the ___ of that factor of production.
(a) money cost
(b) real cost
(c) opportunity cost
(d) average cost
2. The shape of the short-run cost curve is determined by ___.
(a) law of variable proportion
(b) law of returns to scale
(c) both a and b
(d) none of a and b
3. The Total Fixed Cost (TFC) curve will be ___.
(a) horizontal
(b) upward rising
(c) convex
(d) concave
4. The short-run TVC curve will be___.
(a) downward sloping
(b) upward sloping
(c) ‘U’ shaped
(d) Inverse ‘S’ shaped
5. The vertical difference between the TC curve and the TVC curve
(a) continuously increases
(b) continuously decreases
(c) remains the same
(d) none of these
6. The vertical difference between AC and AVC curve
(a) continuously increases
(b) continuously decreases
(c) remains the same
(d) none of these
7. The shape of the short-run average cost curve will be [2017, 2022]
(a) concave
(b) downward sloping
(c) upward rising
(d) ‘U’ shaped
8. When average cost decreases, marginal cost
(a) decreases
(b) increases
(c) will be less than AC
(d) will be greater than AC
9. When MC < AC, AC will be
(a) downward sloping
(b) upward rising
(c) fixed
(d) none of these
10. When average cost increases marginal cost
(a) increases
(b) decreases
(c) is higher than average cost
(d) is lower than average cost
11. At the lowest point of the AC curve
(a) AC = MC
(b) MC is lowest
(c) AC > MC
(d) AC < MC
12. As output increases, average fixed cost [2015]
(a) decreases
(b) increases
(c) remains fixed
(d) initially decreases and increases thereafter
13. In the short run average fixed cost curve is [2019]
(a) upward rising
(b) rectangular hyperbola
(c) U-shaped
(d) concave
14. Which curve is rectangular hyperbola in shape?
(a) AVC
(b) AFC
(c) AC
(d) MC
15. Average Fixed Cost (AFC) curve will be
(a) downward sloping
(b) horizontal
(c) ‘U’ shaped
(d) upward rising
16. Marginal Cost (MC) curve [2018, 2022]
(a) never slopes downwards
(b) initially slopes down and then slopes up
(c) never slopes upwards
(d) intersects the AC curve at its highest point
17. In the short run the MC curve is
(a) downward sloping
(b) upward rising
(c) ‘V’ shaped
(d) ‘U’ shaped
18. When AVC is minimum
(a) AVC = MC
(b) AVC > MC
(c) AVC < MC
(d) AVC = AC
19. Among AC, MC and AVC the minimum point of ___ curve comes first and the minimum point of ___ curve comes last.
(a) AC, MC
(b) MC, AC
(c) MC, AVC
(d) AVC, AC
20. The difference between fixed cost and variable cost is applicable
(a) only in the short run
(b) only in the long run
(c) both in the short run and in the long run
(d) in no period of time
21. If the production process is subject to constant returns to scale, the long-run total cost curve will be
(a) straight line through the origin
(b) convex
(c) concave
(d) horizontal
22. When the production process is subject to constant returns to scale, the LAC curve will be
(a) downward sloping
(b) upward rising
(c) horizontal
(d) vertical
23. The curve which is obtained from the envelope of the short-run curves is
(a) LAC
(b) LMC
(c) both a and b
(d) none of a and b
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