A person who directs resources to achieve a stated goal.

a. Manager
b. Customer
c. Saler
d. Managerial

The science of making decisions in the presence of scarce resources

a. Manager
b. Economic
c. Sale
d. Import

The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.

a. Managerial economics
b. Manager
c. Goal
d. Person

Accounting profit is the total amount of money taken in from sales (total revenue, or price times
quantity sold) minus the dollar cost of producing goods or services.

a. Accounting profit
b. Economic
c. Change in demand
d. Change in supply

The difference between total revenue and total opportunity cost

a. Implicit cost
b. Economic profits
c. Accounting profit
d. Manager

The cost of the explicit and implicit resources that are forgone when a decision is made.

a. Opportunity cost
b. Demand curve
c. Implicit
d. Change in demand

A decision which leads to lower income but is not recorded on balance sheet.

a. Change in demand
b. Change in supply
c. Demand curve
d. Implicit cost
A transaction that has measurable cost to a firm, purchase of new assets.

a. Explicit cost
b. Implicit cost
c. Demand curve
d. All of the above
The amount that would have to be invested today at the prevailing interest rate to generate the given future value.
a. Manager
b. Economic
c. present value
d. Economic profits
The present value of the income stream generated by a project minus the current cost of the project.
a. net present value
b. Explicit cost
c. Implicit cost
d. All of the above
Economic incentives are financial motivations for people to take certain actions.

a. Change in demand
b. Change in supply
c. Demand curve
d. Understand incentives

You need to understand how business is done in your industry, the ways products are sold and
delivered, and what discounts and

a. Understand market
b. Understand incentives
c. Market
d. All of the above

The change in total benefits arising from a change in the managerial control variable Q.

 Understand market
 Change in demand
 Marginal benefit
 All of the above

The change in total costs arising from a change in the managerial control variable Q.

a. Marginal cost
b. Marginal benefits
c. Economic
d. Revenue
The additional revenues that stem from a yes-or-no decision.

a. Change in demand
b. Change in supply
c. Demand curve
d. Incremental revenues

The additional costs that stem from a yes-or-no decision.

a. Implicit cost
b. Explicit cost
c. Incremental costs
d. All of the above

A curve indicating the total quantity of a good all consumers are willing and able to purchase at each
possible price, holding the prices of related goods, income, advertising, and other variables constant.

a. Market demand curve

b. Change in quantity
c. Incremental cost
d. All of the above

Changes in the price of a good lead to a change in the quantity demanded of that good. This
corresponds to a movement along a given demand curve.

a. Change in demand
b. Demand curve
c. Change in quantity demanded
d. All of the above

Changes in variables other than the price of a good, such as income or the price of another good, lead
to a change in demand. This corresponds to a shift of the entire demand curve.

a. Change in demand
b. Change in supply
c. Demand curve
d. all of the above

A good for which an increase (decrease) in income leads to an increase (decrease) in the demand for
that good.

 Normal good
 Inferior quality
 Change in supply
 All of the above
A good for which an increase (decrease) in income leads to a decrease (increase) in the demand for that
good.

 Normal good
 Change in demand
 Price ceiling
 Inferior good

Changes in the prices of related goods generally shift the demand curve for a good.

 Prices of Related Goods

 Demand curve
 Change in supply
 All of the above

An increase (decrease) in the price of one good leads to an increase (decrease) in the demand for the
other good.

 Demand curve
 Increases
 decrease
 Substitutes Goods

An increase (decrease) in the price of one good leads to a decrease (increase) in the demand for the
other good.

 Complements Goods
 Change in demand
 Change in supply
 Price ceiling

The demand for a product is also influenced by changes in the size and composition of the

 Input Prices
 Population
 Change in supply
 All of the above
The value consumers get from a good but do not have to pay for.

 Population
 Market rate
 Consumer surplus
 Goods

A curve indicating the total quantity of a good that all producers in a competitive market would produce
at each price, holding input prices, technology, and other variables affecting supply constant.

 Market supply curve

 Market research
 Consumer surplus
 All of the above

Changes in the price of a good lead to a change in the quantity supplied of that good. This corresponds
to a movement along a given supply curve.

 Price ceiling
 Change in quantity supplied
 Change in supply
 All of the above

Changes in variables other than the price of a good, such as input prices or technological advances, lead
to a change in supply. This corresponds to a shift of the entire supply curve.

 Change in supply
 Change in demand
 Input Prices
 All of the above

The supply curve reveals how much producers are willing to produce at alternative prices.

 Market research
 Price cilling
 Input Prices
 Price

Technological changes and changes in government regulations also can affect the position of the supply
curve.

 Technology or Government Regulations

 Supply curve
 Change demand
 Market
The number of firms in an industry affects the position of the supply curve. As additional firms enter an
industry, more and more output is available at each given price.

 Number of Firms
 Industry
 Position
 Supply curve

Many firms have technologies that are readily adaptable to several different products.

 Price ceiling
 Substitutes in Production
 Supply
 Producer Expectations

Producer expectations about future prices also affect the position of the supply curve.

 Production
 Producer Expectations
 Supply function
 All of the above

A function that describes how much of a good will be produced at alternative prices of that good,
alternative input prices, and alternative values of other variables affecting supply.

 Producer surplus
 Supply function
 Supply

• All of the above

The amount producers receive in excess of the amount necessary to induce them to produce the good.

 Producer surplus

• Price range

 All of the above

 Economic

The maximum legal price that can be charged in a market.

 Supply
 Price ceiling
 Price rate
 Economic
The dollar amount paid to a firm under a price ceiling, plus the nonpecuniary price.

 Increases
 Full economic price
 Price range
 All of the above

The minimum legal price that can be charged in a market.

 Price floor
 Super profit
 Increases
 Decreases

-Demand is determined by

a. Price of the product

b. Relative prices of other goods
c. Tastes and habits
d. All of the above

(Ans: d)

When a firm’s average revenue is equal to its average cost, it gets ________.

a. Super profit
b. . Normal profit
c. . Sub normal profit
d. . None of the above
(Ans: b)

-Managerial economics generally refers to the integration of economic theory with business.

a. Ethics
b. B. Management
c. Practice
d. All of the above

(Ans: c)

-Given the price, if the cost of production increases because of higher price of raw materials, the supply

a. Decreases
b. . Increases
c. . Remains same
d. . Any of the above

(Ans: a)
The cost recorded in the books of accounts are considered as

a. Total cost
b. . Marginal cost
c. . Average cost
d. . Explicit cost

(Ans: d)

-A Joint Stock Company is managed by the Board of Directors elected by _____ .

a. Top management
b. . Shareholders
c. . Employees of company
d. . None of the above

(Ans: b)

-The out of pocket costs are ________.

a. Sunk costs
b. . Marginal costs
c. . Explicit costs
d. . Social costs
(Ans: b)

Multiple choice question

Chapter # 3rd
Submitted to Madam Khadija
M.com Morning (1st semester)
Submitted by Muzna Akram ( 100128)
Kianat Irshad (100129)
Rafia Afzal (100127)
Hina Munir ( 100133)
Saba Parvaiz (100175)
 Laiba Qadeem(100165)
Anum anwar (100136)
Tehreem Shabbir ( 100167)
Rabia Gohar (100125)

Government College University Faisalabad.

1. If marginal revenue equals marginal cost?

a) No profit is being made
b) Total revenue equals total cost
c) Profits are maximized
d) Producing another unit would increase profits

2. When marginal revenue is zero, total revenue:

a) Maximum
b) Minimum
c) Zero
d) Decreasing

3. Marginal revenue is always less than price at all levels of output in:
a) Perfect competition
 b) Monopoly
c) Both (a) & (b)
d) None of the above

4. Which of the following is not a characteristic of perfect competition?

a) Free entry and exit of the firms
b) Demand curve of a firm is horizontal
c) The marginal revenue curve is horizontal
d) An individual firm can influence the price

5: If the price elasticity of demand for a good is .75, the demand for the good
can be described as:
a) normal
b) elastic
c) inferior
d) Inelastic.

7: The price elasticity of demand measures;

a) the slope of a budget curve
b) how often the price of a good changes
c) the responsiveness of the quantity demanded to changes in price
d) how sensitive the quantity demanded is to changes in demand

8: The price elasticity of demand can range between:

a) negative one and one
b) zero and infinity
c) zero and one
d) negative infinity and infinity

9. An inferior goods is one for which an increase in income causes

a) Decrease in supply
b) Increase in demand
c) Increase in supply
d) Decrease in demand
10. If the income elasticity of demand for a good is negative, it must be
a) An elastic good
b) An inferior good
c) A normal good
d) A luxury good

11. Demand for the commodity is depends on

a) Price of that commodity
b) price of related goods
c) Income
d) ALL of above

12. When the quantity demand of goods increase by a larger percentage as

compared to Income of consumer, income elasticity is high.
a) Unitary income elasticity
b) Low income elasticity
c) Zero income elasticity
d) High income elasticity

13. An increase in income will

a) Lead to movement along the demand curve
b) Shift the supply curve
c) Shift the demand curve
d) lead to An extension of demand

14. A decrease in income should be

a) Shift demand for inferior products inward
b) Shift demand for inferior products outward
c) Shift supply for inferior products inward
d) shift supply for an inferior product outward

15. Average income increase from$20000, p.a to 22000 p. Quantity demand per
Year increase from $5000 to$ 6000 units. Which will be correct in the following?
a) Demand is price elasticity
b) The good is inferior
 c) Income elasticity
d) The product is normal

16. the relationship among the change in price, elasticity and total revenue is
called:
a) Total price elasticity
b) Total revenue price test
c) Total price test
d) Total revenue test

17. The demand curve is vertical when demand curve is perfectly:

a) Elastic
b) Inelastic
c) Unitary
d) Infinite

18. The demand curve is horizontal when demand curve is perfectly:

a) Elastic
b) Inelastic
c) Unitary
d) Infinite

19. Total revenue is calculated by multiplying the total amount of goods or

services by:
a) Expenditures
b) Capital
c) Price
d) cost
20. If the demand is inelastic increase in price will lead to:
a) Increase in total revenue
b) Decrease in total revenue
c) Remain same
d) All of the above

21. If the demand is elastic increase in price will lead to:

a) Increase in total revenue
b) Decrease in total revenue
c) Remain same
d) All of the above

22. Demand is said to be elastic if the absolute value of the own price elasticity
is greaterthan1.
a) (EQx, Px)<1
b) ( EQx, Px)>1
c) (EQx, Px) =1
d) None of theses

23. The standard error of each estimated coefficient is a measure of how much
each estimated coefficient would vary in regressions based on the same
underlying true demand relation, but with different observations.

a) Demand relation
b) Income elasticity
c) Cross-price elasticity
d) None of These.

24)........ Play an important role in the pricing decisions of firms that sell multiple
products.
a. Demand relation
 b. Income elasticity.
c. Cross-price elasticity
d. None of These

25. Given a parameter estimate, its standard error, and the iid normal
assumption, the firm manager can construct upper and lower bounds on the
true value of the estimated coefficient by constructing a 95 percent confidence
interval is called.....
a. Parameter
b. Regression packages report
c. Confidence Intervals
d. None of theses

26. The techniques described above to estimate a linear demand function with a
single explanatory variable can also be used to estimate a nonlinear demand
function is called.....
a. F-Statistic
b. Demand relation
c. Nonlinear and Multiple Regressions
d. None of theses

27. Unitary elasticity of demand mean

a) EP =>1
b) EP =<1
c) EP =o
d) EP =1

28. In the case of unitary elastic demand, the shape of demand curve is
a) Vertical line
b) Horizontal line
c) Rectangular hyperbola
d) Steep

29. Unitary elasticity of demand is:

 a) Zero
b) Equal to one
c) Greater than 1
d) Less than 1

30. The utility of a commodity is:

a) Its expected social value
b) The extent of its practical use
c) Its relative scarcity
d) The degree of its fashion

31. When the demand curve is a rectangular hyperbola, it represents:

a) Perfectly elastic demand

b) Unitary elastic demand
c) Perfectly inelastic demand
d) Relatively elastic demand

32. CROSS ELASTICITY OF DEMAND IS:

a) NEGATIVE FOR COMPLEMENTARY GOODS

b) NEGATIVE FOR SUBSTITUTE GOODS

c) UNITARY FIR INFERIOR GOODS.

d) POSITIVE FOR INFERIOR GOODS

33. A POSITIVE CROSS ELASTICITY OF DEMAND COEFFICIENT INDICATES THAT:

a. A PRODUCT IS AN INFERIOR GOODS

b. A PRODUCT IS A NORMAL GOODS

c. TWO PRODUCTS ARE SUBSTITUTE GOODS

d. TWO PRODUCTS ARE COMPLEMENTARY GOODS

34. FOR WHICH PRODUCT IS THE INCOME ELASTICITY OF DEMAND MOST LIKELY
TO BE NEGATIVE?

a. COMPUTER SOFTWARE

b. USED CLOTHING

c. BASKETBALLS

d. BREAD

35. THE CROSS PRICE ELASTICITY BETWEEN COCA COLA AND PEPSI

a. POSITIVE, THAT IS COKE AND PEPSI ARE COMPLEMENT

b. NEGATIVE, THAT IS COKE AND PEPSI ARE COMPLEMENT

c. POSITIVE, THAT IS COKE AND PEPSI ARE SUBSTITUTE

d. NEGATIVE, THAT IS COKE AND PEPSI ARE SUBSTITUTES

36. The own price elasticity of demand for motor oil in 0.4. the quantity of
motor oil demanded decrease by 8% what will happen to the price of motor oil,
to lead to this decrease in quantity demanded?

a) Price increase by 8%

b) Price increase by 20%

c) Price increase by 4%

d) Price increase by 10%

37. The own price elasticity of demand for toothpick is 0.6. The price of
toothpick falls by 10%. As a result, what will happen by sellers of toothpick?

a) Total revenue will increase

b) Total revenue will decrease

c) Total revenue will be at same rate

 d) None of above

38. If the price of elasticity of demand for a good is 75, the demand for the good
can be described as:

a) Normal

b) Elastic

c) Inelastic

d) Inferior

39. The price elasticity of demand will increase with the length of the period to
which the demand curve remains because:

a) Consumer income will increase

b) Demand curve shift outward

c) All price increase

d) Consumer able to find better substitute

40. Demand is said to b elastic if the value of own price elasticity is:

a) Greater than 1

b) Less than 1

c) Equal to 1

d) None of the above

41. If the elasticity of demand is greater than 1 then it will be:

a) Luxury good
 b) Necessity good

c) Normal good

d) Substitute good

42. Goods, that income elasticity are negative:

a) Superior good

b) Inferior good

c) Normal good

d) Complementary good

43. If the price elasticity is in between 0 and 1 then:

a) Inelastic

b) Elastic

c) Perfectly elastic

d) Zero elastic

44. If price decreases then your expenditure decreases, and demand must be:

a) Unit

b) Elastic

c) Inelastic

d) Linear

45. If goods are complements definitely then:

a) Income elasticity are negative

b) Income elasticity are positive

c) Cross elasticity are negative

d) cross elasticity are positive

Chapter 4

1. The human brain can do what even supercomputer and sophisticated _____Technology are in
capable of doing

A. Artificial intelligence

B. Improve technology

C. Explore things

D. Making thing easy

2. A new model help us to understand how consumer will respond to the

A. Same choice

B. Same product

C. Alternative choice

D. None

3. How many distinct factors of consumer

A. One

B. Two
C. Three

A. Four

4. A curve that define the combination of two goods and give a consumer the same level of
satisfaction, is called

A. Marginal rate of substitution

B. Consumer equilibrium

C. Market rate of substitution

D. Indifferent curve

5. The rate at which a consumer is willing to substitute one good from another good and
maintain the same level of satisfaction

B. Consumer equilibrium

C. Marginal rate of substitution

D. Market rate of substitution

E. Indifferent curve
6. There are two different factor but distinct factor to consider.

A. Consumer opportunities

B. Consumer preference

C. Consumer equilibrium

D. A&B both

7. The share of indifferent curve depend upon

A. Consumer equilibrium

B. Consumer opportunities

C. Consumer preference

D. None

8. Marginal rate of substitution stand for

A. IC

B. MRS

C. DMU

D. NONE

9. In making decision individual faces______ constraint

A. Legal and time constraint

B. Physical constraint

C. Budget constraint

D. All of the above

10. Constraint restricts consumer behaviour by forcing the consumer to select a bundle of goods
that affordable.

A. Budget

B. Physical

C. Time

D. Legal

11. The consumer opportunity set depend on_______

A. Market price

B. Consumer income
C. Budget line

D. Both A and B

12. In change in income graph whenever increase in income tends to ____in purchasing power or
decrease in income tend to ____in purchasing power

A. Increase, decrease

B. Increase, increase

C. Decrease, Increase

D. Decrease, decrease

13. The bundle of goods that exhaust a consumer income is called

A. Budget set

B. Budget line

C. Budget constraint

D. None of above

14. The rate at which one good may be treated for another in the market is called

A. Marginal rate of substitution

B. Marginal rate of elasticity

C. Marginal rate of diversity

D. Marginal rate of utility

15. If decrease in income budget shift line towards origion and budget line remain

A. Changed
B. Decreased

C. Unchanged

D. None

16. The bundles of goods a consumer can afford is called..?

a) Budget line

b) Budget constraint

c) Budget set

d) None of these

17. When we suppose in changes in price the consumer income remain fixed at M but the price of
good X
a) Increase

b) Decrease

c) Sufficient

d) Insufficient

18. When the price of good X increase to 5.The 5 is the amount of X

a) Maximum

b) Minimum

c) Better

d) Slope

19. The consumer can is reduced to M/Px= 100/5=20 units of X. This is the intercept.

a) Vertical

b) Slope

c) Horizontal

d) Equilibrium

20. The consumer spends his entire income on good Y, he can purchase M/Py=100/5=20 units of Y,
thus the intercept is?

a) Slope

b) Horizontal

c) Equilibrium

d) Vertical

21. The objective of the consumer is to choose the consumption bundle that maximizes his or her

a) Utility

b) Satisfaction

c) Vertical

d) Both a and b
22. The consumption bundle is the affordable bundle that yield the greatest satisfaction to
the consumer.

a) Consumer equilibrium

b) Comparative statistics

c) Horizontal

d) Vertical

23. A chance in the price of good will lead to a chance consumption is the bundle.

a) Horizontal

b) Equilibrium

c) Constrain

d) Substitution
24. Chances in consumer equilibrium due t a decrease in the price of good X the good Y is a for X.

a) Substitute

b) Equilibrium

c) Constrain

d) Complementary

25. A change in income will lead to change in the

a) Consumption behaviour of consumer

b) Consumer taste

c) Change in the price if good

d) None of the above

26. If the consumer’s income increase to so that his or her budget line

a) Shift in

b) Shift out

c) Constant

d) Parallel shift

27. The movement along a given indifference curves those results from a change in the relevant
price of goods, holding real income constant is called

a) Substitute effect

b) Effecting consumption

c) Income effect

d) All of the above

28. The movement from indifference curve to another that results from the change in real
income caused by a price change.

a) Substitution effect

b) Effecting consumption
c) Income effect

d) None of the above

29. If the substitution effect and the income effect move in the opposite directions, then the good is

a) Normal good

b) Inferior

c) Essential

d) A luxury

30. The substitution effect of a increase in the price of a good causes

a) Increase sales of the good

b) A increase in the quantity demanded

c) A reduction in the quantity demanded o the good

d) A decrease in the consumer’s real income

31. When good 1 is neither normal nor inferior that is, when there are no income effects for good 1

a) EV is unrelated to CV

b) CV≤CH

c) EV=CV

d) EV≥CV

32. A price reduction decrease the

a) Price of each unit purchased

b) The demand

c) The quality of unit

d) Both b and c

33. Leisure model is used in the indifference curve to find

a) Benefit

b) Loss

c) Advantages

d) Both a and b

34. Leisure model is used

a) Male

b) Female

c) People

d) Worker people

35. Higher profit and sales lead to

a) Larger firm

b) Small firm

c) Medium firm

d) All of the above

36. Larger firms provide more

a) Cash

b) Sales

c) Product

d) Perks

37. Perks like

a) Spacious offices

b) Executive health clubs

c) Corporate jets

d) All of the above

38. When manager pays increase than also increase

a) Output

b) Profit

c) Purchase

d) Both a and b

39. When manager only depends on output e.g. paid commission then indifference curve shift

a) Vertical

b) Horizontal

c) Straight

d) All of the above

40. When manager only depend on profit then indifference curve shift

a) Vertical

b) Horizontal

c) Straight

d) All of the above

Chapter #5
The Production Process and Costs
Multiple choice questions
Subject teacher: Madam khadija
Submitted by: Yawar hayat(100180)

1. A function that defines the maximum amount of

output that can be produced with a given set of inputs.

a) polynomic

b) production

c) constant

d) variable

2. factors are the inputs the manager cannot adjust in

the short run.

a) variable

b) fixed

c) total
 d) constant

3. factors are the inputs a manager can adjust to

alter production.
a) Average

b) Variable

c) Fixed

d) Constant
4. The maximum level of output that can be produced with a
given amount of inputs are called .
a) average product

b) total product

c) marginal product

d) linear produt

5. A measure of the output produced per unit of input are called

a) linear product
b) average product

c) total product
 d) marginal product

6. change in total output attributable to the last

unit of an input.
a) Decrease

b) Marginal product

c) Linear product

d) Total product

7. Range of input usage over which marginal

product increases..

a) Negative marginal returns

b) Increasing marginal returns

c) Decreasing marginal returns

d) All of the above

8. Range of input usage over which marginal

product declines..

a) Increasing marginal returns

b) Decreasing marginal returns

 c) Negative marginal returns

d) All of the above

9. The range over which marginal product is positive but

declining is known as

a) Range of increasing

b) Range of decreasing

c) Negative marginal returns

d) All of the above

10. The range over which marginal product is negative is

known as the range of .
a) increasing marginal returns

b) negative marginal returns

c) decreasing marginal returns

d) all of the above

11. The of an input thus is the value of the

output produced by the last unit of that input.

a) Value average product

 b) Value marginal product

c) Value total product

d) All of the above

12. Function that assumes a perfect relationship

between all inputs and total output.

a) Negative

b) Linear

c) Positive

d) All of the above

13. The function is also called the fixed-

proportions production function.

a) Cobb_doughlas production

b) Leontief production

c) Linear production

d) All of the above

14. A production function that lies between the extremes of the
linear production function and the Leontief production
function is the function.

a) Fixed

b) Cobb-Douglas production

c) Increasing

d) All of the above

15. Defines the combinations of inputs that yield

the same level of output.

a) Products

b) Isoquant

c) Leontief

d) All of the above

16. The rate at which labour and capital can substitute for each
other is called the
a) law of diminishing marginal rate
b) marginal rate of technical substitution

c) average rate
 d) all of the above

17. A line that represents the combinations of

inputs that will cost the producer the same amount of money .

a) Straight

b) Isocost

c) Average

d) All of the above

The production process and costs

M.COM 1st

Submitted To: Prof. Mam

GOVERNMENT COLLEGE UNIVERSITY

FAISALABAD
 
1-The process by which inputs are transformed into ‘output’.
(A) Production
(B) productivity
(C) Manufacturing
(D) None of the above
 

2-Which of the following is not an input?

(A) steel
(B) aluminum
(C) rubber
(D) car

3-The difference between revenue and cost is called

(A) wage
(B) profit
(C) output
(D) none of the above
 

4-It is the technological knowledge that determines the maximum levels of output that can
be produced using different combinations of inputs.
(A) productivity
(B) production function
(C) manufacturing
(D) none of the above

5-The inputs that a firm uses in the production process are called
(A) factors of production
(B) organs of production
(C) production inputs
(D) none of the above
 

6-Following is (are) factor(s) of production.

(A) labor
(B) capital
(C) both (A) and (B)
(D) none of the above

7-Which of the following is true?

(A) In the short run, at least one of the factor – labors or capital – cannot be varied
(B) In the long run, all factors of production can be varied
(C) both (A) and (B)
(D) None of the above
 

8-The relationship between the variable input and output, keeping all other inputs constant,
is often referred to as ___ of the variable input.
(A) Total Product (TP)
(B) Average Product
(C) Marginal Product
(D) None of the above
 

9-___ of an input is defined as the change in output per unit of change in the input when all
other inputs are held constant.
(A) Total Product (TP)
(B) Average Product
(C) Marginal Product
(D) None of the above

10-___ is defined as the output per unit of variable input.

(A) Total Product (TP)
(B) Average Product
(C) Marginal Product
(D) None of the above
 

11-Marginal Product =
(A) Output / Input
(B) Input / Output
(C) Change in output / Change in input
(D) Change in input / Change in output

12-Marginal product is undefined at ___ level of input employment.

(A) zero
(B) one
(C) two
(D) three
 

13-Law of variable proportions or the law of diminishing marginal product is the tendency of
the Marginal Product to
(A) first increase and then fall
(B) first fall and then increase
(C) fall constantly
(D) increase constantly

14-An increase in the amount of one of the inputs keeping all other inputs constant results in
(A) decrease in output
(B) an increase in output
(C) consistency in output
(D) none of the above
 

15-When a proportional increase in all inputs results in an increase in output by the same
proportion, the production function is said to display
(A) Decreasing Returns to Scale (DRS)
(B) Increasing Returns to Scale (IRS)
(C) Constant returns to scale (CRS)
(D) None of the above

16-For every level of output, the firm chooses the

(A) maximum cost input combination
(B) least cost input combination
(C) maximum cost output combination
(D) least cost output combination
 

17-Total cost =
(A) Total variable cost
(B) Total fixed cost
(C) Total variable cost + Total fixed cost
(D) Total variable cost – Total fixed cost

18-At zero level of output, Total cost =

(A) Total variable cost
(B) Total fixed cost
(C) Total variable cost + Total fixed cost
(D) Total variable cost – Total fixed cost
 

19-Average fixed cost (AFC) =

(A) Total Fixed cost / unit of output
(B) Total Variable cost / unit of output
(C) Total cost / unit of output
(D) None of the above

20-Average variable cost (AVC) =

(A) Total Fixed cost / unit of output
(B) Total Variable cost / unit of output
(C) Total cost / unit of output
(D) None of the above
 

21-Short run average cost (SAC) =

(A) Total Fixed cost / unit of output
(B) Total Variable cost / unit of output
(C) Total cost / unit of output
(D) None of the above

22-Short run marginal cost (SMC) =

(A) change in total cost / change in output
(B) change in total cost / change in input
(C) change in total variable cost / change in output
(D) change in total fixed cost / change in output
 

23-Marginal cost is undefined at ___ of output.

(A) zero
(B) one
(C) two
(D) three

24-Total fixed cost

(A) increases with the increase in production
(B) decreases with the increase in production
(C) remains constant for all levels of production
(D) none of the above

25- In the long run, all inputs are

(A) variable
(B) constant
(C) depends upon the units of production
(D) none of the above
 

26-Which of the following graph curves are U-shaped?

(A) Average variable cost (AVC)
(B) Long run marginal cost (LRMC)
(C) Long run average cost (LRAC)
(D) All of the above