Theory of Production - 7 Mayank Dua 1. Which of the following is true of the relationship between the marginal cost function and the average cost function? (a) If MC is greater than ATC, then ATC is falling. (b) The ATC curve intersects the MC curve at minimum MC. (c) The MC curve intersects the ATC curve at minimum ATC. (d) If MC is less than ATC, then ATC is increasing.
2. If LAC curve falls as output expands, this is due to :
(a) Law of diminishing returns (b) Economics of scale (c) Law of variable proportion (d) Dis-economics of scale
3. Planning curve is related to which of the following?
(a) Short run average cost curve (b) Long run average cost curve (c) Average variable cost (d) Average total cost
4. Which of the following is known as Envelope curve?
(a) Marginal Cost Curve (b) Average Fixed Cost Curve (c) Long Run Average cost Curve (d) Total Fixed Cost Curve
5. Which of the following statements concerning the long-run average cost curve is false? (a) It represents the least-cost input combination for producing each level of output. (b) It is derived from a series of short- run average cost curves. (c) The short-run cost curve at the minimum point of the long-run average cost curve represents the least-cost plant size for all levels of output. (d) As output increases, the amount of capital employed by the firm increases along the curve. 6. The negatively-sloped (i.e. falling) part of the long-run average total cost curve is due to which of the following? (a) Dis economies of scale. (b) Diminishing returns. (c) The difficulties encountered in coordinating the many activities of a large firm. (d) The increase in productivity that results from specialization.
7. A firm’s long-run average total cost curve is.
(a) Identical to its long-run marginal- cost curve as all factors are variable. (b) Also its long-run total cost curve because it explains the relationship cost and quantity supplied in the long run. (c) In fact the average total cost curve of the optimal plant in the short run as it tries to produce at least cost. (d) Tangent to all short-run average total cost the curves and represents the lowest average total cost for producing each level of output.
8. The positively sloped (rising) part of the long run average cost curve indicates working of the ________. (a) Dis economies of scale (b) Increasing returns to scale (c) Constant returns to scale (d) Economies of scale
9. External economies accrue due to ________:
(a) Increasing returns to scale (b) Increasing returns to factor (c) Law of variable proportion (d) Low cost
10. External Economies arise due to:
(a) Growth of ancillary industries (b) High cost of technologies (c) Increase in the price of factors of production (d) None of the above
11. External economies can be achieved through:
(a) Foreign trade only (b) Superior managerial skill (c) Extension of transport and credit facilities (d) External assistance 12. Economies of scale exist because as a firm increases its size in the long run: (a) Labour and management can specialize in their activities more. (b) As a larger input buyer, the firm can get finance at lower cost and purchase inputs at a lower per unit cost. (c) The firm can afford to employ more sophisticated technology in production. (d) All of these.
13. External Economies of Scale are obtained by:
(a) A firm (b) A group of firm (c) Small Production (d) Society
14. External economics are enjoyed:
(a) By large producers only (b) As firm expands (c) Both (a) and (b) (d) None of the above
15. Issue requiring decision making in the context of business are:
(a) How much should be the optimum output at what price should the firm sell? (b) How will the product be placed in the market? (c) How to combat the risks and uncertainties involved? (d) All of the above
16. Long run price is also called by the name of ________.
17. Which of the following equation represents profit maximization condition?
(a) MC = MR (b) MC > MR (c) MC < MR (d) None
18. Which of the following statements is true?
(a) Accumulation of capital depends solely on income of individuals. (b) Savings can be influenced by government policies. (c) External economies go with size and internal economies with location. (d) The supply curve of labour is an upward slopping curve. 19. Supply curve remaining unchanged, an increase in demand will lead to. (a) A fall in price (b) A rise in price (c) No change in price (d) AN increase in supply
20. Price of a commodity is best expressed as ________.
(a) Exchange value (b) Cost of goods sold (c) Production cost (d) Nominal value
21. A firm will close down in the short period if its average revenue is less than its: (a) Average cost (b) Average variable cost (c) Marginal cost (d) Average fixed cost
22. Which of the following statements is incorrect?
(a) The LAC curve is also called the planning curve of a firm. (b) Total revenue = price per unit X number of units sold. (c) Opportunity cost is also called alternative cost. (d) If total revenue is divided by the number of units sold we get marginal revenue.
23. Average Revenue Curve is also known as ________.
Test Series: June, 2022 Mock Test Paper 2 Foundation Course Paper 4: Business Economics and Business and Commercial Knowledge Part-I: Business Economics Questions
Test Series: June, 2022 Mock Test Paper 2 Foundation Course Paper 4: Business Economics and Business and Commercial Knowledge Part-I: Business Economics Questions
