Practice Test


1) Which of the following is considered production in economics ?


2) Identify the correct statements


3) Which of the following is not a characteristic of land ?


4) Which of the following is true


5) In the production of wheat ,all of the following are variable factors that are used by the farmer except ;


6) The marginal product of a variable input is best described as :


7) Diminishing marginal returns implies


8) The short run, as economists use the phrase , is characterized by


9) The marginal , average , & total product curves encountered by the firm producing in the short run exhibits all of the following relationships except


10) To economists , the main difference between the short run & the long run is that


11) Which of the following is the best definition of the production function ?


12) The 'law of diminishing returns' applies to


13) Diminishing returns occurs


14) Use this information :- Hours of labour : 0 , Total Output : 0 , Marginal Product : 0 ;, Hours of labour : 1 , Total Output : 100 , Marginal Product : 100 ;,Hours of labour : 2 , Total Output : 0 , Marginal Product : 80 ;,Hours of labour : 3 , Total Output : 240 , Marginal Product : 0 ;, What is the output when 2 hours of labour are employed ?


15) Use this information :- Hours of labour : 0 , Total Output : 0 , Marginal Product : 0 ;, Hours of labour : 1 , Total Output : 100 , Marginal Product : 100 ;,Hours of labour : 2 , Total Output : 0 , Marginal Product : 80 ;,Hours of labour : 3 , Total Output : 240 , Marginal Product : 0 ;, What is the marginal product of the 3rd hour of labour ?


16) Use this information :- Hours of labour : 0 , Total Output : 0 , Marginal Product : 0 ;, Hours of labour : 1 , Total Output : 100 , Marginal Product : 100 ;,Hours of labour : 2 , Total Output : 0 , Marginal Product : 80 ;,Hours of labour : 3 , Total Output : 240 , Marginal Product : 0 ;, What is the average product of the first 3 hours hour of labour ?


17) What is the cost increase continuously with the increase in production ?


18) Which of the following cost curves is never 'U' shaped ?


19) Total cost in the short run is classified into fixed cost & variable costs .Which 1 of the following is variable cost ?


20) In short run ,when the output of a firm increases ,its average fixed cost


21) The cost of one thing in the term of the alternative given up is known as


22) With which of the following is the concept of marginal cost closely related ?


23) Which of the following is true ?


24) Which of the fallowing is an example of an 'explicit cost ' ?


25) Which of the fallowing is an example of an ' implicit cost ' ?


26) Use this information :- Output (O) ; - 0 , Total Cost (TC) : Rs.240 , Output (O) ; - 1 , Total Cost (TC) : Rs.330 ,Output (O) ; - 2 , Total Cost (TC) : Rs.410 ,Output (O) ; - 3 , Total Cost (TC) : Rs.480 ,Output (O) ; - 4 , Total Cost (TC) : Rs.540 ,Output (O) ; - 5 , Total Cost (TC) : Rs.610 ,Output (O) ; - 6 , Total Cost (TC) : Rs.690 , The average fixed cost of 2 units is


27) Use this information :- Output (O) ; - 0 , Total Cost (TC) : Rs.240 , Output (O) ; - 1 , Total Cost (TC) : Rs.330 ,Output (O) ; - 2 , Total Cost (TC) : Rs.410 ,Output (O) ; - 3 , Total Cost (TC) : Rs.480 ,Output (O) ; - 4 , Total Cost (TC) : Rs.540 ,Output (O) ; - 5 , Total Cost (TC) : Rs.610 ,Output (O) ; - 6 , Total Cost (TC) : Rs.690 , The marginal cost of the sixth units of output is


28) Use this information :- Output (O) ; - 0 , Total Cost (TC) : Rs.240 , Output (O) ; - 1 , Total Cost (TC) : Rs.330 ,Output (O) ; - 2 , Total Cost (TC) : Rs.410 ,Output (O) ; - 3 , Total Cost (TC) : Rs.480 ,Output (O) ; - 4 , Total Cost (TC) : Rs.540 ,Output (O) ; - 5 , Total Cost (TC) : Rs.610 ,Output (O) ; - 6 , Total Cost (TC) : Rs.690 ,Diminishing marginal returns starts to occur between units


29) Marginal cost is defined as :


30) Which of the following is true of the relationship between the marginal cost function & the average cost functions ?


31) Which of the following statements is true of the relationship among the average cost functions ?


32) Which of the following is not a determinant of the firm's cost functions ?


33) Which of the following statements is correct concerning the relationships among the firm's function ?


34) Suppose output increases in the short run .Total cost will


35) Which of the following statements concerning the long-run average cost curve is false ?


36) The negatively-sloped (i.e. falling) part of the long -run average total cost curve is due to which of the following


37) The positively-sloped (i.e. raising) part of the long -run average total cost curve is due to which of the following


38) A firm's average total cost is Rs.300 at 5 units of output & Rs.320 at 6 units of output .The marginal cost of producing the 6th unit is


39) A firm producing 7 units of output has been an average total cost of Rs.150 & has to pay Rs.350 to its fixed factors of production whether it produces or not.How much of the average total cost is made up of variable cost ?


40) A firm's variable cost is Rs.1,000 at 5 units of output .If the fixed cost are Rs.400 .What will be the average total cost at 6 units of output .


41) A firm's average cost is Rs.20 at 6 units of output .What will be the cost at 4 units of output .


42) Which of the following is true ?


43) Which of the following is a function of an entrepreneur ?


44) In describing a given problem technology,the short run is best described as lasting


45) If decreasing returns to scale are present ,then if all inputs are increased by 10 % then


46) The production function is a relationship between a given combination of inputs &


47) If the marginal product of labour is below the average product of labour ,it must be true that:


48) The average product of labour is maximized when marginal product of labour


49) The law of variable proportions is drawn under all of the assumptions mentioned below except the assumptions that


50) If the labour is an active factor ,land is


51) Which of the following is production in economics ?


52) Which is not a feature of labour ?


53) Individual supply curve of labour is


54) Income effect when wages rises means


55) Which capital includes education , training & skill of the workers ?


56) Which capital includes durable consumer goods , inventories & intermediate goods ?


57) Surplus of production over consumption in an accounting year is called


58) The other names for capital formation is


59) The second stage of capital formation is


60) Individual saving levels depends upon


61) Corporate saving depends upon


62) For mobilising savings ,we require


63) Name of the factor of production which hires & organise the production activity


64) When inputs are transformed into output ,it is called


65) Technically efficient combinations of inputs is those which


66) A long-run production function is one in which


67) Product per unit of labour employed is called


68) Addition made to 'TP' when one more unit of labour is employed is called


69) When TP is maximum ,MP is


70) When AP is maximum ,MP is equal to


71) When TP is falling, MP is


72) Reasons for rise in both AP & MP curves is


73) The shape of both AP & MP curve is


74) A rational producer will always operate in which stage of law of variable proportion ?


75) The third stage of law of variable proportion is called


76) First stage of law of variable proportion ranges from origin till the point where


77) In the stage of diminishing returns,both AP & MP are falling &


78) Decreasing return to scale is a stage of


79) When the increase in output is less than in proportion to increase in inputs , it is called


80) When labour & capital are increased by 10% & also increases by 10% then we have


81) The reasons behind increasing returns to scale are


82) When large firm takes up advertising & grants margin to distribution ,it is called


83) When large firm diversifies output,market ,etc ,it is called


84) When a large number of firms at one place gets advantages for which they made no efforts ,it is called


85) When firm grows so large that it becomes very difficult to manage,it is called


86) When a person smokes in a non-smoking zone , he causes disutility to other,it is an example of


87) If a firm takes up too much money on loan & finds it is difficult to repay ,it is a case of


88) When a manager is over burdened & faces the problems of control & coordination , it is case of


89) When there is De-centralization of decision making it is case of


90) When bigger & updated machines are installed then cost falls .what kind of returns to scales takes place ?


91) The cost which is never zero even when production is shaped is called


92) The cost which are prime cost & can be changed with changes in the level of output are called


93) Explicit cash payments made by an entrepreneur to the suppliers of various factors of production


94) TC is given as


95) shape of TFC is


96) The shape of TC curve is


97) The reasons behind the slope of TC & TVC curve is


98) AC is obtained by dividing TC by the level of


99) Addition made to total cost due to change in output by one more unit is called


100) When AC is falling MC is


101) When AC is rising MC is


102) When AC is minimum MC is


103) Minimum point AC occurs to the right of minimum point of


104) MC curve passes through minimum point of both AC &


105) Falling portion of long-run AC curves is due to


106) LAC curve 'envelopes'


107) The minimum point of long run AC curve is due to


108) Which cost curve is called planning curve ?


109) In a U-shaped long run AC curve there is no extra capacity to meet seasonal variation in demand. It is called ?


110) Each point on long run AC curve is a point of tangency with the corresponding


111) AVC can be calculated by the formulae


112) AFC can be calculated by the formulae