Test: Theory Of Cost- 4 - CA Foundation MCQ

Tilling of soil.

Singing a song before friends.

Preventing a child from falling into a manhole on the road.

Painting a picture for pleasure.

The average product is at its maximum when marginal product is equal to average product.

The law of increasing returns to scale relates to the effect of changes in factor proportions.

Economies of scale arise only because of indivisibilities of factor proportions.

Internal economies of scale can accrue only to the exporting sector.

Its supply for the economy is limited.

It is immobile.

Its usefulness depends on human efforts.

It is produced by our forefathers.

Accumulation of capital depends solely on income.

Savings can also be affected by the State.

External economies go with size and internal economies with location.

The supply curve of labour is an upward slopping curve.

the seed and fertilizer used when the crop is planted.

the field that has been cleared of trees and in which the crop is planted.

the tractor used by the farmer in planting and cultivating not only wheat but also corn and barley.

the number of hours that the farmer spends in cultivating the wheat fields.

total product divided by the number of units of variable input.

the additional output resulting from a one unit increase in the variable input.

the additional output resulting from a one unit increase in both the variable and fixed inputs.

the ratio of the amount of the variable input that is being used to the amount of the fixed input that is being used.

Extensive cultivation

Intensive cultivation

Better marketing

(a) and (b) of above

at least one fixed factor of production and firms neither leaving nor entering the industry.

a period where the law of diminishing returns does not hold.

no variable inputs – that is all of the factors of production are fixed.

all inputs being variable.

when total product is rising, average and marginal product may be either rising or falling.

when marginal product is negative, total product and average product are falling.

when average product is at a maximum, marginal product equals average product, and total product is rising.

when marginal product is at a maximum, average product equals marginal product, and total product is rising.

in the short run all inputs are fixed, while in the long run all inputs are variable.

in the short run the firm varies all of its inputs to find the least-cost combination of inputs.

in the short run, at least one of the firm’s input levels is fixed.

in the long run, the firm is making a constrained decision about how to use existing plant and equipment efficiently.

The relationship between market price and quantity supplied.

The relationship between the firm’s total revenue and the cost of production.

The relationship between the quantities of inputs needed to produce a given level of output.

The relationship between the quantity of inputs and the firm’s marginal cost of production.

the short run, but not the long run.

the long run, but not the short run.

both the short run and the long run.

neither the short run nor the long run.

when units of a variable input are added to a fixed input and total product falls.

when units of a variable input are added to a fixed input and marginal product falls.

when the size of the plant is increased in the long run.

when the quantity of the fixed input is increased and returns to the variable input falls.

80

100

180

200

60

80

100

240

60

80

100

240

Average cost.

Marginal cost.

Fixed cost.

Variable cost.

Average cost curve.

Marginal cost curve.

Average variable cost curve

Average fixed cost curve

Cost of raw materials.

Cost of equipment.

Interest payment on past borrowings.

Payment of rent on building.

increases.

decreases.

remains constant.

first declines and then rises.

Long run average cost curve.

Short run average cost curve.

Average variable cost curve.

Average total cost curve.

production cost.

physical cost.

real cost.

opportunity cost.

variable cost.

fixed cost.

opportunity cost.

economic cost.

When the average cost is rising, the marginal cost must also be rising.

When the average cost is rising, the marginal cost must be falling.

When the average cost is rising, the marginal cost is above the average cost.

When the average cost is falling, the marginal cost must be rising.

The wages a proprietor could have made by working as an employee of a large firm.

The income that could have been earned in alternative uses by the resources owned by the firm.

The payment of wages by the firm.

The normal profit earned by a firm.

Interest that could have been earned on retained earnings used by the firm to finance expansion.

The payment of rent by the firm for the building in which it is housed.

The interest payment made by the firm for funds borrowed from a bank.

The payment of wages by the firm.

Rs. 80

Rs. 85

Rs. 120

Rs. 205

Rs. 133

Rs. 75

Rs. 80

Rs. 450

2 and 3.

3 and 4.

4 and 5.

5 and 6.

the change in total cost due to a one unit change in output.

total cost divided by output.

the change in output due to a one unit change in an input.

total product divided by the quantity of input.