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CAF-ECO-3.2

Total questions: 100

Worksheet time: 3hrs 30mins

Name
Class
Date
1.

If TFC = ₹1,200 and output increases from 0 to 20 units, what is AFC at 20 units?

a)

₹60

b)

₹20

c)

₹50

d)

₹15

2.

When output increases, AFC:

a)

First decreases then increases

b)

Always decreases

c)

Always increases

d)

Remains constant

3.

If TC increases from ₹4,500 to ₹4,650 when output rises from 50 to 51 units, MC equals:

a)

₹150

b)

₹3

c)

₹50

d)

₹100

4.

A cost which does not vary with output at all is:

a)

Variable cost

b)

Fixed cost

c)

Marginal cost

d)

Opportunity cost

5.

TFC = ₹1,000; TVC at 3 units = ₹240, at 4 units = ₹300. MC of the 4th unit equals:

a)

₹60

b)

₹100

c)

₹300

d)

₹540

6.

Normal profit is included in:

a)

Explicit cost

b)

Implicit cost

c)

Sunk cost

d)

Replacement cost

7.

Opportunity cost refers to:

a)

Out-of-pocket expenditure

b)

Future costs

c)

Cost of best alternative sacrificed

d)

Total implicit cost only

8.

When MC < AVC, AVC will:

a)

Rise

b)

Fall

c)

Remain constant

d)

Be undefined

9.

AC is minimum only when:

a)

MC > AC

b)

MC < AC

c)

MC = AC

d)

MC is constant

10.

A stair-step cost curve is usually due to:

a)

Division of labour

b)

Batch hiring of supervisors

c)

Increase in fixed cost continuously

d)

Decrease in plant size

11.

Economic cost includes:

a)

Only accounting costs

b)

Only implicit cost

c)

Explicit + Implicit cost

d)

Only normal profit

12.

Variable cost per unit falling initially then rising is due to:

a)

Increasing returns to scale

b)

Constant returns

c)

Law of variable proportions

d)

Diseconomies only

13.

The slope of the TVC curve equals:

a)

TC

b)

MC

c)

TFC

d)

AVC

14.

If TFC = ₹900 and AVC = ₹60 at 30 units, TVC equals:

a)

₹1,800

b)

₹2,700

c)

₹60

d)

₹1,500

15.

The shape of the MC curve is due to:

a)

Law of diminishing returns

b)

Economies of scale

c)

Price of inputs

d)

Linear cost behaviour

16.

When TC = ₹2,000 at 50 units and AC = ₹45, what is TFC?

a)

₹250

b)

₹500

c)

₹750

d)

₹1,000

17.

The long-run AC curve is also called:

a)

Operating curve

b)

Planning curve

c)

Profit curve

d)

Demand curve

18.

Given AC = AVC + AFC. If AC is rising, it implies:

a)

MC < AC

b)

MC > AC

c)

AFC > AVC

d)

AVC is falling

19.

Which cost exists even at zero output?

a)

AC

b)

TFC

c)

TVC

d)

MC

20.

Replacement cost is:

a)

Price paid to acquire a productive asset

b)

Realisable value

c)

Price paid to exchange one asset with another

d)

Costs are sunk

21.

Shut-down cost is:

a)

Avoidable cost

b)

Unavoidable fixed cost

c)

Variable cost

d)

Incremental cost

22.

Semi-variable cost includes:

a)

Only fixed part

b)

Only variable part

c)

Both fixed and variable elements

d)

None

23.

Explicit cost includes:

a)

Owner’s labour not paid

b)

Depreciation

c)

Opportunity cost

d)

Wages to hired employees

24.

Internal economies lead to:

a)

Rising cost

b)

Falling cost

c)

Diseconomies of scale

d)

Rising short-run costs only

25.

MC is derived from:

a)

TFC

b)

TC

c)

AFC

d)

Opportunity cost

26.

If TFC = ₹1,000 and TVC = ₹2,400 with output = 40, ATC equals:

a)

₹85

b)

₹95

c)

₹100

d)

₹50

27.

TC equals TFC plus:

a)

MC

b)

AC

c)

TVC

d)

AVC

28.

AFC never becomes zero because:

a)

TFC is never zero unless the firm shuts down completely

b)

AFC always rises

c)

TC is high

d)

None

29.

If MC equals ATC at 20 units, then ATC is:

a)

Maximum

b)

Minimum

c)

Constant

d)

Falling

30.

When industry expands and cost reduces for all firms, it is called:

a)

Internal economies

b)

External economies

c)

Diseconomies of scale

d)

Short-run fixed cost reduction

31.

Incremental cost refers to:

a)

Past expenditure

b)

Additional cost you incur when you produce one more unit

c)

Zero economic profit

d)

Sunk expenditure

32.

Sunk cost includes:

a)

Future cost

b)

Recoverable cost

c)

Irrecoverable past cost

d)

Variable cost

33.

LAC curve is tangent to SAC curves:

a)

At minimum of each SAC

b)

At planning output

c)

From below

d)

From above

34.

When output is beyond optimum scale:

a)

Diseconomies appear

b)

Constant returns apply

c)

AFC rises

d)

MC always falls

35.

Economies of scale do NOT arise because of:

a)

Technical advantages

b)

Managerial specialization

c)

Financial strength

d)

Scarcity of inputs

36.

When MP declines, MC:

a)

Falls

b)

Rises

c)

Constant

d)

Zero

37.

If TVC = ₹480 for 8 units → AVC =

a)

₹60

b)

₹80

c)

₹40

d)

₹120

38.

A cost directly traceable to a product:

a)

Fixed cost

b)

Direct cost

c)

Social cost

d)

Implicit cost

39.

Social cost = ______?

a)

External cost to the society

b)

Fixed cost

c)

Opportunity cost

d)

Sunk cost

40.

MC = ΔTC / ΔQ is:

a)

Average formula

b)

Differential formula

c)

Ratio formula

d)

Logarithmic

41.

Economies arise till:

a)

LAC constant

b)

LAC falling

c)

LAC rising

d)

MC = AC

42.

If AC = ₹200 at 4 units, TFC = ₹400 → AVC =

a)

₹100

b)

₹200

c)

₹300

d)

₹50

43.

L-shaped LAC represents:

a)

Cost decreases continuously after a stage

b)

Cost increases steeply

c)

Always U-shaped

d)

No economics used

44.

If TFC = ₹700 and AFC = ₹14 → Output =

a)

25

b)

40

c)

50

d)

100

45.

Indirect costs:

a)

Cannot be allocated at all

b)

Benefiting multiple products

c)

Always variable

d)

Always avoidable

46.

If TVC falls when production increases:

a)

Impossible

b)

Increasing returns initially

c)

Diminishing returns

d)

Diseconomies

47.

When output is zero:

a)

TC = TVC

b)

TC = TFC

c)

TC = 0

d)

TFC = TVC

48.

The vertical distance between TC & TVC:

a)

MC

b)

TFC

c)

AFC

d)

AC

49.

Output rises 100→120; TC rises 4,000→4,360 → MC =

a)

₹18

b)

₹30

c)

₹29

d)

₹20

50.

TFC=₹600; TC=₹2,200 at 20 units → AVC =

a)

₹70

b)

₹80

c)

₹40

d)

₹50

51.

MC curve cuts ATC curve at:

a)

Minimum of ATC

b)

Maximum of ATC

c)

Beginning

d)

End

52.

TVC increases at decreasing rate → MC:

a)

Increasing

b)

Decreasing

c)

Zero

d)

Negative

53.

If AFC = ₹50 at 10 units → TFC =

a)

₹500

b)

₹50

c)

₹100

d)

₹25

54.

When SAC falls as plant expands → stage of:

a)

Diseconomies

b)

Economies

c)

Shutdown

d)

Sunk cost

55.

If MC rising → MP:

a)

Rising

b)

Falling

c)

Constant

d)

Zero

56.

Example of incremental cost:

a)

Buying new machine

b)

Insurance premium

c)

Past advertisement

d)

Government tax

57.

If AC > MC:

a)

AC rising

b)

AC falling

c)

AC constant

d)

TFC rising

58.

When LAC rising:

a)

Economies

b)

Diseconomies

c)

Constant returns

d)

Shutdown

59.

If MC = ₹50 and AC = ₹40 → AC:

a)

Rising

b)

Falling

c)

Minimum

d)

Zero

60.

If TVC = ₹300 at 5 units → AVC =

a)

₹60

b)

₹50

c)

₹100

d)

₹75

61.

Outlay cost refers to:

a)

Silent cost

b)

Monetary expenditure

c)

Implicit cost

d)

Variable cost only

62.

If firm produces 0 units → Loss =

a)

TFC

b)

MC

c)

TVC

d)

Price

63.

Which is NOT variable input cost?

a)

Fertilizer cost

b)

Seeds

c)

Interest on loan for building

d)

Casual labour

64.

If MC at 5th = ₹90 and MC of 6th = ₹120 → MP:

a)

Rising

b)

Falling

c)

Constant

d)

Zero

65.

TC 2000 @ 10 units; TFC 800 → AVC =

a)

₹60

b)

₹80

c)

₹120

d)

₹100

66.

Diseconomies of scale due to:

a)

Specialization

b)

Rigidity in operation

c)

Cheap inputs

d)

Bulk buying

67.

Social cost > Private cost due to:

a)

External economies

b)

External diseconomies

c)

Outlay cost

d)

TFC

68.

When MC rising steeply → which stage?

a)

Increasing returns

b)

Diminishing returns

c)

Negative returns

d)

Constant returns

69.

When TVC = 0:

a)

Output must be zero

b)

Output must be large

c)

Shutdown condition

d)

Diseconomies

70.

MC intersects AVC at:

a)

Min of AVC

b)

Max of AVC

c)

Min of AC

d)

Rising AVC only

71.

If AVC falling → MC is:

a)

Above AVC

b)

Below AVC

c)

Equal to AVC

d)

None

72.

AFC is continuous downward curve because:

a)

Output increases

b)

TFC decreases

c)

TVC increases

d)

MC increases

73.

If TFC = ₹450 and TFC remains constant → change in AFC due to:

a)

Change in TC

b)

Change in input price

c)

Change in output

d)

Change in MC only

74.

Sunk cost example:

a)

Prepaid insurance refundable

b)

New capital expenditure

c)

R&D already done

d)

Wages to labour

75.

The LAC is tangent to:

a)

SAC only at min

b)

SAC at various levels

c)

TVC only

d)

MC only

76.

If firm expands beyond SAC optimum:

a)

AC decreases

b)

Cost efficiency lost

c)

AFC rises sharply

d)

MC = 0

77.

TC always:

a)

Starts at Y-axis above 0

b)

Starts at origin

c)

U-shaped

d)

Horizontal straight

78.

Minimum efficient scale refers to:

a)

Minimum output level where LAC minimum

b)

Maximum profit level

c)

Shutdown point

d)

Negative returns

79.

Internal managerial diseconomies arise due to:

a)

Efficient communication

b)

Complexity & bureaucracy

c)

Cheap financing

d)

None

80.

If AFC = ₹5 at 80 units → TFC =

a)

₹400

b)

₹80

c)

₹25

d)

₹500

81.

Social cost includes:

a)

Pollution cost

b)

External cost

c)

Private cost

d)

All

82.

If TC = ₹4,000 and AC = ₹200 → units =

a)

10

b)

20

c)

40

d)

50

83.

If AVC increases → MC:

a)

> AVC

b)

< AVC

c)

Equal to AVC

d)

Null

84.

Which of the following is a characteristic of marginal cost?

a)

It is always higher than average cost

b)

It is constant regardless of output

c)

It decreases as output increases

d)

It can vary with changes in production levels

85.

What happens to average fixed cost (AFC) as output increases?

a)

It increases

b)

It becomes negative

c)

It decreases

d)

It remains constant

86.

Which of the following best describes variable costs?

a)

Costs that do not change with output

b)

Costs that vary directly with the level of production

c)

Costs that are incurred regardless of production levels

d)

Costs that are always fixed in the short run

87.

Which of the following curve is never U shaped?

a)

Average Variable cost

b)

Average Fixed cost

c)

Average Total cost

d)

Total cost

88.

Which of the following statement is not true?

a)

Cost curves are the reflection of production curves

b)

Practically the shape of LAC is 'L' shaped

c)

Shape of AFC is Horizontal to X axis

d)

When Output is zero, TC equals TFC

89.

The Shape of TVC is ______?

a)

Upward slope

b)

Inverted S upward rising curve

c)

S shaped curve

d)

downward sloping

90.

The correct equation among the following is:

a)

TC = TFC + AFC

b)

TFC = TC + TVC

c)

AFC = AVC - ATC

d)

ATC = AFC +AVC

91.

The cost incurred to produce MP is ______

a)

Total cost

b)

ATC

c)

MC

d)

None

92.

When MC takes an immediate jump, ATC continues to fall. This is due to_____

a)

MC > ATC

b)

MC = ATC

c)

MC < ATC

d)

MC = 0

93.

When MC = AVC, which of the following is true?

a)

AVC is minimum

b)

AVC is maximum

c)

AVC is rising

d)

AVC is falling

94.

Which of the following statement is true?

i. The costs which cannot be directly traceable are indirect costs.

ii. Accounting costs are not recorded in the books of accounts.

iii. Economic profits will always be less than Accounting profits.

iv. Fixed cost can be zero.

a)

i, ii, iii

b)

i & iii

c)

ii & iv

d)

ii, iii, iv

95.

Shape of Marginal cost curve is:

a)

W shaped

b)

L shaped

c)

U shaped

d)

Downward

96.

AFC is -

a)

Rectangular hyperbola curve

b)

Decreases with increased output

c)

Both

d)

Only option A

97.

The cost that varies with the level of output is known as:

a)

Fixed cost

b)

Variable cost

c)

Average cost

d)

Marginal cost

98.

If total cost (TC) is ₹1,000 and output is 50 units, what is the average cost (AC)?

a)

₹15

b)

₹30

c)

₹25

d)

₹20

99.

The difference between total cost (TC) and total variable cost (TVC) represents:

a)

Average total cost (ATC)

b)

Fixed cost (FC)

c)

Marginal cost (MC)

d)

Average fixed cost (AFC)

100.

Which of the following statement is true?

i. TVC can be zero

ii. TC = TFC + TVC

iii. TFC remains constant for any level of output

iv. TVC follows law of variable proportion

a)

i, ii

b)

ii, iii, iv

c)

i & iv

d)

i, ii, iii & iv

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