Free Printable ECO THEORY OF PRODUCTION AND COST

1.

Variable Cost/Quantity = _______

a)

Marginal Variable Cost

b)

Average Fixed Cost

c)

Average Variable Cost

d)

Marginal Total Cost

2.

Change in Total Revenue/Change in Quantity
ΔTR/ΔQ = _____

a)

Marginal cost

b)

Marginal Revenue

c)

Profit

d)

Marginal Profit

3.

Total Revenue - Total Cost = _____

a)

Profit

b)

Revenue

c)

Marginal Revenue

d)

Variable Revenue

4.

The quantity of input which minimizes average total costs?

a)

Diseconomies of scale

b)

Inefficient Scale

c)

Efficient Scale

d)

Economy of scale

5.

Costs that do not change when the quanity of output produced changes?

a)

Fixed Costs

b)

Variable Costs

c)

Explicit Costs

d)

Implicit Costs

6.

The market value of all the inputs a firm uses in production.

a)

Implicit Costs

b)

Explicit Costs

c)

Total Costs

d)

Marginal Costs

7.

Time period in which one of the costs is fixed?

a)

Long Run

b)

Short Run

8.

Time period in which one of the costs is fixed?

a)

Long Run

b)

Short Run

9.

The amount a firm receives after all costs have been paid.

a)

Revenue

b)

Marginal Profit

c)

Profit

d)

Marginal Revenue

10.

Additional cost associated by producing one additional unit of product.

a)

Fixed Costs

b)

Average Costs

c)

Marginal Costs

d)

Emplicit Costs

11.

The amount a firm receives for the sale of its output.
P x Q = _____

a)

Profit

b)

Total Revenue

c)

Marginal Revenue

d)

Average Profit

12.

An increase in output which arises from one additional unit of input.

a)

Marginal Cost

b)

Marginal Physical Product

c)

Marginal Revenue

d)

Marginal Input

13.

Input costs that may not have a direct outlay of money. Value of the opportunity cost.

a)

Fixed Cost

b)

Variable Cost

c)

Implicit Cost

d)

Explicit Cost

14.

Period of time in which all costs are variable.

a)

Long Run

b)

Short Run

15.

Revenue generated by producing one additional unit of product.

a)

Marginal Revenue

b)

Marginal Profit

c)

Total Revenue

d)

Average Revenue

16.

Costs that change as the quantity of outputs changes.

a)

Fixed Costs

b)

Variable Costs

17.

Measure of profit which includes both explict and implicit costs.

a)

Economic Profit

b)

Accounting Profit

18.

The property whereby long-run average total cost falls as the quantity of output increases.

a)

Economies of Scale

b)

Efficient Scale

c)

Constant Returns to Scale

d)

Diseconomies of Scale

19.

The property whereby long-run average total cost rises as the quantity of output increases.

a)

Economies of Scale

b)

Effecient Scale

c)

Constant Returns to Scale

d)

Diseconomies of Scale

20.

The property whereby long-run average total cost stays the same as the quanity of output changes.

a)

Constant Returns to Scale

b)

Economies of Scale

c)

Efficient Scale

d)

Diseconomies of Scale

21.

Fixed Cost divided by the quantity of output.

a)

Average Fixed Cost

b)

Average Variable Cost

c)

Marginal Cost

d)

Marginal Fixed Cost

22.

Measure of profit which includes explict costs and depreciation of capital.

a)

Accounting Profit

b)

Economic Profit

c)

Total Profit

d)

Marginal Profit

23.

The relationship between the quantity of inputs used to make a good and the quantity of output produced.

a)

Diminishing Marginal Utility

b)

Production Function

c)

Conjunction Junction

d)

Economies of Scale

24.

Occurs when each addition of an input results in declining quantity of the output

a)

Diminishing Marginal Utility

b)

Diminishing Marginal Costs

c)

Diminishing Marginal Returns

d)

Diminishing Marginal Profits

25.

Revenue generated by producing one additional unit of product.

a)

Marginal Revenue

b)

Marginal Profit

c)

Total Revenue

d)

Average Revenue

26.

Average variable cost (AVC) is

a)

Explicit costs

b)

Variable cost divided by output

c)

The increase in output that arises from an additional unit of input

d)

Costs that do not vary with the quantity of output produced

27.

What does marginal cost (MC) tell us?

a)

Is cost from fixed input

b)

Is variable cost

c)

The increase in output that arises from an additional unit of input

d)

The increase in total cost that arises from producing an additional unit of output

28.

Variable cost is

a)

Long run ATC stays the same as the quantity of output changes

b)

Fixed + variable cost

c)

Costs that vary with the output (Q) produced

d)

An explicit cost

29.

Fixed cost

a)

long run ATC rises as output increases

b)

long run ATC falls as output rises

c)

costs that do not vary with the quantity of output produced

d)

long run ATC stays the same as the quantity of output changes

30.

In which type of production are several identical products completed at each production stage?

a)

flow production

b)

batch production

c)

job production

d)

lean production

31.

Which of the following is a claimed advantage of flow production?

a)

Each worker enjoys doing one repetitive job all the time.

b)

Making a product that allows all consumer needs to be met

c)

The capital costs of setting up a production line are low.

d)

The mass production helps to keep costs per unit low.

32.

Which of the following is a necessary condition for flow production?

a)

large numbers of specialist workers

b)

high and steady demand for a standardised product

c)

machinery that can be adapted for production if demand fell

d)

high demand for the product only at certain times

33.

Which of the following products is most likely to be produced using batch production methods?

a)

school uniforms

b)

washing machines

c)

a popular chocolate bar

d)

hand-made watches

34.

A clothing manufacturer is most likely to hold the following stocks except:

a)

materials used in the clothing products

b)

partly finished goods called ‘work in progress’

c)

finished clothing waiting to be sold

d)

spare machines in case of breakdown.

35.

For a supermarket, one of the advantages of holding high stocks of existing products is:

a)

low costs of financing the stock level

b)

being able to respond quickly if consumer tastes change

c)

being able to meet unexpected increases in demand

d)

being able to put unused space to other uses.

36.

All of these factors will influence the maximum stock level held by a cheese maker except:

a)

how perishable the products are

b)

the total space available for stock holding

c)

the interest rate on capital used for buying inventory

d)

the number of workers available

37.

Which of the following is the best definition of ‘an increase inefficiency’?

a)

higher output levels than last year

b)

lower total costs of production

c)

fewer workers employed but output level remainsthe same

d)

10% more workers employed and output also risesby 10%

38.

Which of the following would be an example of ‘lean production’?

a)

producing a greater variety of goods with more workers

b)

holding low stock levels such as with Just-in-Time methods

c)

making smaller quantities of goods than previously

d)

buying the latest equipment to increase output

39.

Which of the following is an advantage of improved quality inproduction?

a)

There should be less customer complaints about faulty goods.

b)

It will guarantee 100% quality at all times.

c)

Output will be lower.

40.

In which type of production are single specialist units produced?

a)

flow production

b)

batch production

c)

job production

d)

lean production

41.

Skilled workers are required in flow production.

a)

True

b)

False

42.

Machinery can be used to mass produce items in Job Production.

a)

True

b)

False

43.

Job production is where each item is made to specific instructions and each item is unique.

a)

True

b)

False

44.

Batch Production is where products are made in groups of similar products.

a)

True

b)

False

45.

Flow production would be used for:

a)

Cans of Coke

b)

Fitted Kitchen

c)

Walkers bags of crisps

46.

Job Production is where the products are:

a)

All the same

b)

Unique

c)

Similar but some groups vary

47.

Which type of production would be used at a bakery?

a)

Job

b)

Batch

c)

Flow

48.

Which type of product would be made using flow production?

a)

Speciality Cakes

b)

Cars

c)

Chocolate Bars

49.

Which method of production would be used for a designer wedding dress?

a)

Flow

b)

Job

c)

Batch

50.

What is a job production?

a)

Standardized products produced using assembly lines

b)

Single product produced individually

c)

Identical products produced in groups

51.

Flow production can be used to produce?

a)

Soda

b)

Bread

c)

Designer dress

52.

What is a benefit of flow production?

a)

Low price

b)

Customized products

c)

Higher unit cost

53.

Continuous production is a feature of which production method?

a)

Job

b)

Flow

c)

Batch

54.

Batch production is producing...

a)

Mass amount of same product

b)

Limited number of same product

c)

One product at a time

55.

Batch production can be used in...

a)

Making a bridge

b)

Baking breads

c)

Creating a road

56.

Advantages of using job production..

a)

High quality

b)

Labour-intensive

c)

Customized products

57.

What is meant by the short run?

a)

at least one factor of production is fixed

b)

all factors of production are fixed

c)

land is fixed

d)

Less than a year

58.

........do not change with output, firms must pay these even if they shut down

a)

Fixed costs

b)

Variable costs

59.

Which of the following is a variable cost?

a)

raw materials

b)

the costs of leasing or purchasing capital equipment

c)

business rates

d)

rental costs of a building

60.

Businesses, such as a vehicle manufacturer, with significant capacity will have ....FC.

a)

High

b)

Low

61.

Fixed costs...

a)

Both 1 and 2

b)

are payable even if the business shuts down

c)

are the overhead costs of a business

d)

Neither 1 nor 2

62.

Average fixed costs must fall continuously as output increases because total fixed costs are...

a)

being spread over a higher level of production.

b)

being spread over a smaller level of production.

c)

being spread over a larger number of workers

d)

being spread over a larger number of machines

63.

A change in FC has no effect on MC. MC relates only to VC!

a)

True

b)

False

64.

When output is zero, VC will be zero but as production increases, TVC will rise

a)

True

b)

False

65.

Law of diminishing returns implies that MC will not eventually rise as output increases

a)

False

b)

True

66.

LRAC is the cost per unit of output feasible when all factors of production are variable

a)

True

b)

False

67.

In the LR all costs are variable and the scale of production can change (i.e. no fixed inputs)

a)

True

b)

False

68.

The term liability means which of the following?

a)

responsibility

b)

likelyhood

c)

propensity

d)

capability

69.

What is a disadvantage of partnerships?

a)

ease of formation

b)

owners share responsibilities

c)

limited liability

d)

possibility of personality conflict

70.

Which of the following is NOT a business organization?

a)

Sole Proprietorship

b)

Corporation

c)

Perfect Competition

d)

Partnership

71.

What is a business owned by stockholders/investors but operated by others?

a)

Sole Proprietorship

b)

Partnership

c)

Corporation

72.

What is ONE disadvantage of a Partnership?

a)

Easier to start

b)

Have to share the profits

c)

Help in making decisions

73.

What is ONE advantage of a Corporation?

a)

Difficult to start

b)

Make all of the decisions

c)

Easy to raise money!

74.

What is ONE disadvantage of a Corporation?

a)

Disagreements

b)

Less direct control

c)

The risk is all on one person

75.

Which business type makes up approximately 75% of all businesses?

a)

Sole Proprietorship

b)

Partnership

c)

Corporation

76.

Which business type has the most sales in the USA?

a)

Sole Proprietorship

b)

Partnership

c)

Corporation

77.

Advantages of this business type are that the owner is their own boss and gets to keep all the profits.

a)

Partnership

b)

Sole Proprietorship

c)

Corporation

d)

Franchise

78.

Disadvantages for this type of business include: owner pays for everything, hard to get money to start from the bank, owner might lack skills & unlimited liability.

a)

Sole Proprietorship

b)

Partnership

c)

Corporation

d)

Franchise

79.

This type of business is owned by one person.

a)

Partnership

b)

Sole Proprietorship

c)

Corporation

d)

Franchise

80.

Which of the following is the definition for Corporation?

a)

business investment that involves renting or leasing another successful business model

b)

unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the United States

c)

unincorporated business owned and operated by two or more people who share the profits and have unlimited liability for the debts and obligations of the firm

d)

form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, and to sue and be sued

81.

Which of the following is a disadvantage of a corporation?

a)

it is easy to raise financial capital using stocks, bonds, or loans.

b)

the double taxation of corporate profits. Profits are taxed the first time when the corporation pays income taxes. The profits are taxed a second time when shareholders pay taxes on their dividends.

c)

it is easy to get a charter to start a corporation.

d)

Owners and shareholders have total control over what happens with the business.

82.

Which of the following is an advantage of a Franchise?

a)

a nationwide network that had a respected product, a deep product line, excellent quality standards, nationwide advertising, and professional advice whenever needed.

b)

the ease of raising financial capital through stocks, bonds, and loans.

c)

the ease of management between two or more partners.

d)

the limited liability protection of a person's assets if the company fails.

83.

Which of the following is a disadvantage of a Franchise?

a)

the expense of purchasing the rights to a franchise can be high.

b)

the cost to terminate a franchise before its term is high.

c)

not owning the company, just the franchise.

d)

all other options are disadvantages.

84.

Disadvantages include limited life and
the potential for conflict between partners

a)

Sole Propriotorship

b)

Partnership

c)

Corporation

85.

Advantages include limited liability for owners, unlimited life, and ease of transfer of ownership.

a)

Sole Propriotorship

b)

Partnership

c)

Corporation

86.

What is a major advantage of a business that is a partnership rather than a sole proprietorship?

a)

The responsibility for the business is shared

b)

The business is easy to set up

c)

The partners are not responsible for business debts

d)

The business is easy to sell

87.

Which of the following is a disadvantage of franchise?

a)

assistance from a parent company

b)

name recognition

c)

shared advertising expenses

d)

must follow parent company business structure

88.

Which of the following is NOT a type of business ownership?

a)

partnership

b)

sole proprietorship

c)

entrepreneurship

d)

franchise

89.

Which of the following is a type of business which operates as a separate legal entity?

a)

corporation

b)

franchise

c)

partnership

d)

sole partnership

90.

A _______ forms boards to act as governing bodies. It is the most complicated form of business.

a)

franchise

b)

partnership

c)

sole proprietorship

d)

corporation

91.

This type of cooperative is when an agricultural cooperative that helps members sell their products:

a)

Consumer Cooperative

b)

Service Cooperative

c)

Producer Cooperative

d)

Business Franchise

92.

How is a corporation different from a sole proprietorship or partnership?

a)

A corporation has only one or two owners.

b)

A corporation is usually owned by one person.

c)

A corporation requires a legal charter with the state.

d)

The owners (stockholders) have limited liability.

93.

A ________________ seeks to make a profit from its operations.

a)

Nonprofit Organization

b)

For-Profit Organization

c)

Public Sector

d)

Private Sector

94.

____________________ obtain goods from manufactures and resell them to organizational users.

a)

Retailers

b)

Wholesalers

c)

Production

d)

Industry

95.

__________________ buy goods from wholesalers or directly from manufacturers and resell them to the consumers.

a)

Wholesalers

b)

Retailers

c)

Non-Profit Organization

d)

Profit Organization

96.

List the three types of business organizations in order from MOST control over decision-making to LEAST control over decision-making.

a)

Sole proprietorship, partnership, corporation.

b)

Corporation, partnership, sole proprietorship.

c)

Partnership, corporation, sole proprietorship.

d)

Sole proprietorship, corporation, partnership.

97.

This means that the business no longer exists if the owner dies, quits, or sells the business.

a)

Limited liability

b)

limited life

c)

unlimited life

98.

This is a firm with four or more businesses making unrelated products.

a)

Multinational

b)

Conglomerate

c)

Sole proprietorship.

99.

This is a company that can be found in many different countries.

a)

Conglomerate

b)

Multinational

c)

Sole Proprietorship

100.

This is an organization that helps people and does not seek financial gain.

a)

Multinational

b)

Coporation

c)

Nonprofit

101.

What is the definition of UNLIMITED LIABILITY?

a)

A legal obligation on the owners of a business to settle all debts of the business. In law there is no distinction between the assets and debts of the business and the personal assets and debts of the owner.

b)

Owners are not fully liable for the company’s debts.

102.

Variable Cost/Quantity = _______

a)

Marginal Variable Cost

b)

Average Fixed Cost

c)

Average Variable Cost

d)

Marginal Total Cost

103.

Change in Total Revenue/Change in Quantity
ΔTR/ΔQ = _____

a)

Marginal cost

b)

Marginal Revenue

c)

Profit

d)

Marginal Profit

104.

Total Revenue - Total Cost = _____

a)

Profit

b)

Revenue

c)

Marginal Revenue

d)

Variable Revenue

105.

Costs that do not change when the quanity of output produced changes?

a)

Fixed Costs

b)

Variable Costs

c)

Explicit Costs

d)

Implicit Costs

106.

Additional cost associated by producing one additional unit of product.

a)

Fixed Costs

b)

Average Costs

c)

Marginal Costs

d)

Emplicit Costs

107.

The amount a firm receives for the sale of its output.
P x Q = _____

a)

Profit

b)

Total Revenue

c)

Marginal Revenue

d)

Average Profit

108.

Opportunity cost is:

a)

(a) Direct cost

b)

(b) Total cost

c)

(c) Accounting cost

d)

(d) Cost of foregone

109.

As output increases, average fixed cost:

a)

(a) Remains constant

b)

(b) Starts falling

c)

(c) Start rising

d)

(d) None

110.

Average fixed cost can be obtained through:

a)

b)

c)

d)

111.

AFC curve is:

a)

(a) Convex & downward sloping

b)

(b) Concave & downward sloping

c)

(c) Convex & upward sloping

d)

(d) Concave & upward rising

112.

U – shaped average cost curve is based on:

a)

(a) Law of increasing cost

b)

(b) Law of decreasing cost

c)

(c) Law of constant returns to scale

d)

(d) Law of variable proportions

113.

When shape of average cost curve is upward, marginal cost:

a)

(a) Must be decreasing

b)

(b) Must be constant

c)

(c) Must be rising

d)

(d) Any of these

114.

If total cost at 10 units is ₹ 600 and ₹ 640 for 11^th unit. The marginal cost of 11^th unit is:

a)

(a) ₹ 20

b)

(b) ₹ 30

c)

(c) ₹ 40

d)

(d) ₹ 50

115.

Economic cost excludes:

a)

(a) Accounting cost + explicit cost

b)

(b) Accounting cost + implicit cost

c)

(c) Explicit cost + Implicit cost

d)

(d) Accounting cost + opportunity cost

116.

Which of the following cost curves is never ‘U’ shaped?

a)

(a) Average cost curve

b)

(b) Marginal cost curve

c)

(c) Total cost curve

d)

(d) Fixed cost curve

117.

External economies accrue due to -------------------:

a)

(a) Increasing returns to scale

b)

(b) Increasing returns

c)

(c) Law of variable proportion

d)

(d) Low cost

118.

At which point does the marginal cost curve intersect the average variable cost curve and short run average total cost curve?

a)

(a) At equilibrium points

b)

(b) At their lowest points

c)

(c) At their optimum points

d)

(d) They don’t intersect at all

119.

Implicit cost may be defined as the:

a)

(a) Costs which do not change over a period of time

b)

(b) Costs which the firm incurs but doesn’t disclose

c)

(c) Payment to the non owners of the firm for the resources.

d)

(d) Money payment which the self employed resources could have earned in their best alternative employment.

120.

Returns to scale will said to be in operation when quantity of:

a)

(a) All inputs are changed

b)

(b) All inputs are changed in already established proportion

c)

(c) All inputs are not changed

d)

(d) One input is changed while quantity of all other inputs remain the same

121.

Which of the following curves never touch any axis but is downward?

a)

(a) Marginal cost curve

b)

(b) Total cost curve

c)

(c) Average fixed cost curve

d)

(d) Average variable cost curve

122.

Which of the following is known as Envelop-curve?

a)

(a) MC curve

b)

(b) AFC curve

c)

(c) LAC curve

d)

(d) TFC curve

123.

a)

(a) 140

b)

(b) 120

c)

(c) 50

d)

(d) 40

124.

Long run does not have:

a)

(a) Average Cost

b)

(b) Total Cost

c)

(c) Fixed Cost

d)

(d) Variable Cost

125.

Which of the following curve is not U shaped?

a)

(a) AFC

b)

(b) AVC

c)

(c) MC

d)

(d) TC

126.

Which one of the following is correct?

a)

(a) AFC = AVC + ATC

b)

(b) ATC = AFC – AVC

c)

(c) AVC = AFC + ATC

d)

(d) AFC = ATC – AVC.

127.

A firm produces 10 units of a commodity at an average total cost of ₹ 200 and with a fixed cost of ₹ 500. Find out the component of average variable cost in the total cost:

a)

(a) ₹ 300

b)

(b) ₹ 200

c)

(c) ₹ 150

d)

(d) ₹ 100

128.

The positively sloped (rising) part of the long run average cost curve indicates working of the _________.

a)

(a) Diseconomies of scale

b)

(b) Increasing returns to scale

c)

(c) Constant returns to scale

d)

(d) Economies of scale

129.

Average fixed cost curve is always:

(a) Declining when output increases (c) U-Shaped, if there are decreasing returns to scale

(b) U-Shaped, if there are increasing returns to scale (d) Intersected by marginal cost at its minimum point

a)

(a) Declining when output increases

b)

(b) U-Shaped, if there are increasing returns to scale

c)

(c) U-Shaped, if there are

d)

(d) Intersected by marginal cost at its minimum point

130.

In the long run, which of the following statement is true for a firm in a perfectly competitive industry?

a)

(a) It average cost at its minimum average cost

b)

(b) The price is more than the average fixed cost

c)

(c) The marginal cost is greatest than marginal revenue

d)

(d) The fixed cost is lower than the total variable cost

ECO THEORY OF PRODUCTION AND COST

Total questions: 130

Worksheet time: 4hrs 20mins

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