Economics Quiz on Production and Profit

If the fixed cost (FC) of a firm is $500 and the variable cost (VC) is $1,000 for producing 200 units, what is the Total Cost (TC) of production?

• $500

• $1,500

• $2,000

• $1,000

Which of the following is an example of a Fixed Cost (FC)?

• Cost of raw materials

• Salary of a manager

• Wages of temporary workers

• Utility bills for production

What is the formula for calculating Marginal Cost (MC)?

• ΔRevenueΔOutput

• ΔTotal CostΔOutput

• ΔFixed CostΔOutput

• Total RevenueQuantity

A firm has a Total Revenue (TR) of $10,000 and Total Cost (TC) of $7,000. What is its Total Profit (π)?

• $7,000

• $3,000

• $10,000

• $17,000

In a perfectly competitive market, Average Revenue (AR) is:

• Always less than price.

• Equal to price.

• Higher than price.

• Unrelated to price.

Economic Profit occurs when:

• Total revenue equals total costs.

• Total revenue exceeds total costs, including opportunity costs.

• The firm breaks even.

• Total revenue equals fixed costs.

If a firm increases its inputs by 10% and its output increases by 12%, this firm is experiencing:

• Constant Returns to Scale

• Decreasing Returns to Scale

• Increasing Returns to Scale

• Decreasing Marginal Returns

If a firm increases the price of its product by 10% and the quantity demanded decreases by 15%, the Price Elasticity of Demand (PED) is:

• 0.67

• 1.5

• 0.15

• 0.10

In the short run, a firm maximizes profit by producing at the point where:

• Total Revenue (TR) is maximized.

• Total Cost (TC) equals Total Revenue (TR).

• Marginal Revenue (MR) equals Marginal Cost (MC).

• Fixed Cost (FC) equals Variable Cost (VC).

If Marginal Revenue (MR) is greater than Marginal Cost (MC), a firm should:

• Increase output to maximize profit.

• Decrease output to maximize profit.

• Maintain current output level.

• Increase fixed costs.