Theory Of Production And Cost

20 Questions | Total Attempts: 1713

SettingsSettingsSettings
Please wait...
Production Quizzes & Trivia

Questions and Answers
  • 1. 
    Which of the following is considered production in Economics?
    • A. 

      Tilling of soil.

    • B. 

      Singing a song before friends.

    • C. 

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

    • D. 

      Painting a picture for pleasure.

  • 2. 
    Identify the correct statement :
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 3. 
    Which of the following is not a characteristic of land? 
    • A. 

      Its supply for the economy is limited.

    • B. 

      It is immobile.

    • C. 

      Its usefulness depends on human efforts.

    • D. 

      It is produced by our forefathers.

  • 4. 
     Which of the following statements is true?
    • A. 

      Accumulation of capital depends solely on income.

    • B. 

      Savings can also be affected by the State.

    • C. 

      External economies go with size and internal economies with location.

    • D. 

      The supply curve of labour is an upward slopping curve.

  • 5. 
    In the production of wheat, all of the following are variable factors that are used by the  farmer except :                                                                                                                                        
    • A. 

      The seed and fertilizer used when the crop is planted.

    • B. 

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

    • C. 

      The tractor used by the farmer in planting and cultivating not only wheat but also

    • D. 

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

  • 6. 
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 7. 
    Diminishing marginal returns implies:                                                                                   
    • A. 

      Decreasing average variable costs.

    • B. 

      Decreasing marginal costs.

    • C. 

      Increasing marginal costs.

    • D. 

      Decreasing average fixed costs.

  • 8. 
    The short run, as economists use the phrase, is characterized by:    
    • A. 

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

    • B. 

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

    • C. 

      No variable inputs - that is all of the factors of production are fixed.

    • D. 

      All inputs being variable.

  • 9. 
    The marginal, average, and total product curves encountered by the firm producing in the short run exhibit all of the following relationships except:
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 10. 
    To economists, the main difference between the short run and the long run is that :
    • A. 

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

    • B. 

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

    • C. 

      In the short run, at least one of the firm's input levels is fixed.

    • D. 

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

  • 11. 
    Which of the following is the best definition of the aproduction functiona?     
    • A. 

      The relationship between market price and quantity supplied.

    • B. 

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

    • C. 

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

    • D. 

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

  • 12. 
    The alaw of diminishing returnsa applies to :
    • A. 

      The short run, but not the long run.

    • B. 

      The long run, but not the short rim.

    • C. 

      Both the short run and the long run.

    • D. 

      Neither the short run nor the long run.

  • 13. 
    Diminishing returns occur :                                                               
    • A. 

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

    • B. 

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

    • C. 

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

    • D. 

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

  • 14. 
    What is the total output when 2 hours of labour are employed? Hours of Labour Total  Output Marginal Product 0 _______ _______ 1 100 100 2 _______ 80 3 240 _____  
    • A. 

      80

    • B. 

      100

    • C. 

      180

    • D. 

      200

  • 15. 
    • A. 

      60

    • B. 

      80

    • C. 

      100

    • D. 

      240

  • 16. 
    • A. 

      60

    • B. 

      80

    • C. 

      100

    • D. 

      240

  • 17. 
    Which cost increases continuously with the increase in production?      
    • A. 

      Average cost.

    • B. 

      Marginal cost.

    • C. 

      Fixed cost.

    • D. 

      Variable cost.

  • 18. 
    Which of the following cost curves is never 'U' shaped?
    • A. 

      Average cost curve.

    • B. 

      Marginal cost curve.

    • C. 

      Average variable cost curve.

    • D. 

      Average fixed cost curve.

  • 19. 
    Total cost in the short run is classified into fixed costs and variable costs. Which one of the following is a variable cost?  
    • A. 

      Cost of raw materials.

    • B. 

      Cost of equipment.

    • C. 

      Interest payment on past borrowings.

    • D. 

      Payment of rent on building.

  • 20. 
    In the short run, when the output of a firm increases, its average fixed cost :
    • A. 

      Increases.

    • B. 

      Decreases.

    • C. 

      Remains constant.

    • D. 

      First declines and then rises.