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average and total cost MCQs

Practise focused average and total cost questions with marked answers for exam preparation and subject revision.

average and total cost Mcqs
1. When marginal costs are below average total costs ?
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A. average fixed cost is rising

B. average total cost is minimized

C. average total cost is raising

D. average total cost is falling
2. If there are implicit costs of production ?
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A. economic profit will always be zero

B. economic profit and accounting profit will be equal

C. accounting profit will always be zero

D. economic profit will exceed accounting profit

E. accounting profit will exceed economic profit
3. If a production function exhibits diminishing marginal product the slope of the corresponding total-cost curve ?
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A. becomes steeper as the quantity of output increases

B. is liner (a straight line)

C. could be any of these answers

D. become flatter as the quantity of output increases.

4. If a production function exhibits diminishing marginal product. its slope ?
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A. becomes flatter as the quantity of the input increase

B. is linear (a straight line)

C. becomes steeper as the quantity of the input increase

D. could be any of these answers

5. The efficient scale of production is the quantity of output that minimizes ?
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A. average total cost

B. average fixed cost

C. average variable cost

D. marginal cost

6. 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 accounting profit at Nailas pottery factory is ?
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A. Rs75,000

B. Rs35,000

C. Rs70,000

D. Rs30,000

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

B. diseconomies of scale

C. an increase in average total costs

D. constant returns to scale

8. 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 ?
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A. slope upward

B. slope downward

C. be U-shaped.

D. be flat (horizontal)

9. Which of the following is a variable cost in the short run ?
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A. rent on the factory

B. salaries paid to upper management

C. wages paid to factory labor

D. payments on the lease for factory equipment

E. interest payments on borrowed financial capital

10. If marginal costs equal average total costs ?
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A. average total cost is minimized

B. average total cost is raising

C. average total cost is falling

D. average total cost is maximized

11. Accounting profit is equal to total revenue minus ?
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A. variable costs

B. marginal costs

C. the sum of implicit and explicit costs.

D. implicit costs

E. explicit costs.
12. Economic profit is equal to total revenue minus ?
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A. marginal costs

B. implicit costs

C. explicit costs

D. variable costs

13. Which of the following statements is true ?
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A. All costs are variable in the long run

B. All costs are fixed in the long run

C. All costs are variable in the short run

D. All costs are fixed in the short run.

14. 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 Nailas pottery factory is ?
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A. Rs70,000

B. Rs75,000

C. Rs30,000

D. Rs80,000