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CBSE Questions for Class 11 Commerce Economics Production And Costs Quiz 13 - MCQExams.com
CBSE
Class 11 Commerce Economics
Production And Costs
Quiz 13
Production function is only a technical relationship between physical inputs and physical output.
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True
0%
False
Explanation
Production function is only a technical relationship between physical inputs and physical output. This tells us how best the resources can be utilised for maximising output.
A short-run production function is one which has ___________.
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at least one fixed factor
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all fixed factors
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all variable factors
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at least one variable factor
Explanation
The short run production function is one in which at least is one factor of production is thought to be fixed in supply.
In this case it cannot be increased or decreased, and the rest of the factors are variable in nature.
Stage of negative returns sets in when ______.
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MP is diminishing
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MP is rising
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MP is negative
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none of these
When we move from point P to point $$P_1$$, the opportunity cost producing additional unit of bullets __________.
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declines
0%
increases
0%
remains constant
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is zero
Explanation
When we move from point P to point P1, the opportunity cost producing additional unit of bullets increases.
As at P there 0 bullet when it move from p to p1 then it will increase to 100 so opportunity cost will increase.
Hence b is the correct option.
Rising marginal cost always implies a rising average cost.
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True
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False
Explanation
False. Average cost can fall even when marginal cost is rising, as corresponding to output range LQ in diagram. AC will fall even when MC is rising, so long as MC $$<$$ AC.
MC and AC are equal when AC tends to stabilize.
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True
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False
Explanation
MC and AC are equal when AC tends to stabilise
or when AC is constant, AC = MC. See AC and MC corresponding to point E in the diagram where AC = MC.
MC is greater than AC when production is in a state of diminishing returns.
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True
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False
Explanation
When the production is in a state of diminishing returns, MC will be rising in accordance with falling MP. AC is rising, with the rising MC but less than MC or MC $$>$$ AC.
When MC $$>$$ ATC, ATC must rise.
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True
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False
Explanation
Whenever MC is greater than ATC, ATC is rising. When ATC reaches its minimum point, MC=ATC. Relationship between Short-run and Long-run Average Total Cos
Area under MC curve $$=$$ TVC.
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True
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False
Explanation
Total variable cost (TVC) is the area covered under
MC curve corresponding to a given level of output. In diagram, area OLKM is total variable cost when output is OL.
Long run average cost curve is flatter than the short run average cost curve, even when both the curves are U-shaped.
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True
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False
Explanation
Long run average cost curve is flatter than the short run average cost curve, because short run average cost curve relates to one plant, or the constant scale of output. Long run average cost curve, on the other hand, relates to several plants or the expanding scale of output.
As soon as marginal cost rises, average variable cost also rises.
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True
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False
Explanation
Average variable cost can fall even when marginal cost starts rising, as corresponding to output range LQ in diagram. AVC falls even when MC is rising, so long as MC $$<$$ AVC.
Even when marginal cost is rising, average variable cost may fall.
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True
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False
Explanation
Even when marginal cost is rising, average variable cost may fall, as corresponding to output range LQ in diagram. AVC will fall even when MC is rising, so long as MC $$<$$ AVC.
If marginal cost is above average variable cost at a time when output is rising, then ______________.
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average total cost is falling
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average variable cost is rising
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average variable cost is falling
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average total revenue is rising
Explanation
If marginal cost is above average variable cost at a time when output is rising, then average variable cost is rising.
Short-run cost curve are influenced by ____________.
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principle of returns to scale
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law of variable proportions
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external and internal economies and diseconomies
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none of the above
Explanation
Under short-run only the law of variable proportion is applicable, since short-run is characterised with at least one fixed factor and one variable factor.
The period of time in which the plant capacity can be varied is known as __________.
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the short period
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the market period
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the long period
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all of the above.
A firm can quit the industry in the short run.
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True
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False
Explanation
Quitting is not possible in the short run because short run, by definition, is a period of time which is too short for the existing firms to quit the industry or for any new firms to enter the industry. Therefore, a firm can quit the industry only in the long run.
Each short-run average cost curve coincides with the long run cost curve at the ___________of the short-sun average cost curve.
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upper point
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lower point
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middle point
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no fixed position
Production function is a relationship between:
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Price and demand
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Production and cost
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Production and factors of production
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Supply and production
Explanation
Production function is the relationship between inputs and outputs. i.e., production and factors of production.
A long run analysis of production is called ______________.
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economies of scale
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law of variable proportions
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law of increasing returns
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law of returns to scale
Explanation
Law of returns to scale is applicable only in the long run.
The economies and diseconomies of large scale production is determined by:
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the long run MC curve
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the long run TC curve
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the normal long run AC curve
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the normal long run TC curve
In the case of very short period ______ is variable.
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land
0%
capital
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labour
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none of the above
Which is an inverted 'U' shaped curve?
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AC
0%
MC
0%
TP
0%
FC
Explanation
The TP (total product) curve is an inverted (reverse) 'U' shape curve.
A firm is able to sell any quantity of a good at a given price. The firm's marginal revenue will be :
(Choose the correct alternative):
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Greater than Average Revenue
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Less than Average Revenue
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Equal to Average Revenue
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Zero
Explanation
When a firm is able to sell any quantity of a good at a given price, then the firm’s Marginal Revenue will be equal to Average Revenue.
Hence, C is the correct option.
When the Average Product (AP) is maximum, the Marginal Product
(MP) is : (Choose the correct alternative)
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0%
Equal to AP
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Less than AP
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More than AP
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Can be any one of the above
When average cost is decreasing what status marginal cost has as compared to
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MC > AC
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MC = AC
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MC < =AC
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MC is not equal to AC
Explanation
The relationship between AC and MC is as follows:
1. Then marginal cost is less than average cost, average cost falls with the increase in the output in other words MC is below then AC.
2. When marginal cost is more than average cost, average cost is rising in other words MC is above AC.
3. When marginal cost is equal to average cost, average cost is constant. MC curve cut AC curve at its minimum.
Hence, option C is correct.
Calculate total cost of four units:
Units
Total cost
Marginal cost
2
80
40
4
---
30
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0%
140
0%
120
0%
50
0%
40
Explanation
Marginal cost =
∆
Total cost/
∆Output.
At 4 units,
Let the required units be 'x' units at 4 units.
Marginal cost = 30 = (x-80)/(4-2).
30 = (x-80)/2.
30 x 2 = x-80.
60 = x-80.
60+80 = x.
x = 140.
Hence, correct answer is option A.
Law of variable proportion is related to:
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Both short-run and long-run
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Long-run
0%
Short-run
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Very Long-run
Explanation
The law of variable proportions states that as more and more unit of variable factors are applied to the given quantity of a fixed factor total product increases at a increasing rate initially but eventually it will increase at a diminishing rate. The law exhibit the short term production function in which one factor varies while the other is fixed. Law of variable proportion concern itself with the way the output changes when you increase the number of units of variable factors.
Hence, option C is correct
Which of the following explains the short-run production function?
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Law of Demand
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Law of Variable Proportion
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Returns to Scale
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Elasticity of Demand
Explanation
The law of variable proportions states that as more and more unit of variable factors are applied to the given quantity of a fixed factor total product increases at a increasing rate initially but eventually it will increase at a diminishing rate. The law exhibit the short term production function in which one factor varies while the other is fixed. Law of variable proportion concern itself with the way the output changes when you increase the number of units of variable factors.
Hence, option B is correct.
At which time all the factors of production may be changed?
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Short-run
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Long-run
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Very Long-run
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All the three
Explanation
Short run refers to the period of time during which the amount of one or more inputs called the fixed factors cannot be changed. For example the amount of plant and equipment, etc is fixed in the short run, this implies that an increase in the output in the short run can be brought only by increasing these inputs that can be varied known as variable inputs.
In the long-run all the factors are variable in nature.
hence, option B is correct.
AFC = Rs.20, quantity produced = 10 units. What will be the AFC of 20th units?
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10
0%
20
0%
5
0%
None
Explanation
TFC = AFC x Q = Rs.20 x 10 = Rs.200.
AFC = TFC/Q = Rs.200/20 = Rs.10.
AFC of 20th units = Rs.10. Hence, correct answer is option A.
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