Chapter 5 MCQ

ECO 415 Production and Cost Theory
CHAPTER 6: PRODUCTION AND COST THEORY
MULTIPLE CHOICE
PRODUCTION THEORY
1) In the relationship between total product, average product and marginal product, the
average product equals the marginal product when average product is:
A. decreasing,
B. increasing.
C. maximum.
D. negative.
2) In the diagram below, state the level of input when marginal product is zero:
TP
TP
P Q R S Labor
A. P
B. Q
C. R
D. S
3) Marginal product is:

A. the increase in total output attributable to the employment of one more worker.
B. the increase in total revenue attributable to the employment of one more worker.
C. the increase in total cost attributable to the employment of one more worker.
D. total product divided by the number of workers employed.
4) At what point in the graph shown below does the Law of Diminishing Returns set in ?
Product
AP
A B C D Input
MP
A. Point A
B. Point B
C. Point C
D. Point D
5) Which of the following is NOT correct ?

A. Marginal product becomes negative after total product falls.
B. Where marginal product is zero, total product is at a maximum.
C. Where total product is at a maximum, average product is also at a maximum.
D. Where marginal product is greater than average product, average product is rising.
6) The range of diminishing marginal productivity begins when

A. total product begins to fall.
B. average product reaches its maximum.
C. marginal product reaches its maximum.
D. marginal product begins to fall at an increasing rate.
7) Fixed inputs are factors of production that:

A. are determined by a firm's plant size.
B. can be increased or decreased quickly as output changes.
C. cannot be increased or decreased as output changes in the short-run.
D. are fixed in the long-run.
8) Which of the following is true at the point where diminishing returns set in?
A. Both marginal product and marginal cost are at a maximum.
B. Both marginal product and marginal cost are at a minimum.
C. Marginal product is at a maximum and marginal cost at a minimum.
D. Marginal product is at a minimum and marginal cost at a maximum.
9) Which of the following is true when the total product of labor is maximized?
A. Marginal product is increasing
B. Marginal product is negative
C. Marginal product is zero
D. Average product is increasing.
10) The law of Diminishing marginal Return relates to the

A. returns to scale
B. marginal Output of a variable factor.
C. Marginal Output of a fixed factor.
D. Average output of a variable factor.
11) In the long run, a firm can vary

A. its capital but not its labor.
B. its labor but not its capital.
C. both its labor and capital.
D. neither its labor nor its capital.
12) The law of diminishing returns states that as

A. the size of plant increases, the firm's fixed cost decreases.
B. the size of a plant increases, the firm's fixed cost increases.
C. a firm uses more of a variable input, given the quantity of fixed inputs, the
marginal product of the variable input eventually diminishes.
D. a firm uses more of a variable input, given the quantity of fixed inputs, the
firm's average total cost will decrease eventually.
13) When total product is maximized

A. both marginal product and average product are zero
B. marginal product is positive but average product is zero
C. marginal product is zero but average product is positive
D. both marginal product and average product are negative
14) "When a variable factor of production is added continuously to a unit of fixed factor of
production, the total production will increase but at a decreasing rate". The statement above
is related to the law of
A. diminishing marginal utility
B. diminishing marginal return
C. negative return
D. increase in return
15) Production in the short run

A. is subject to the law of diminishing marginal returns.
B. can be increased by employing another unit of a variable factor as long as the marginal
product of that factor is positive.
C. involves some fixed factors.
D. is characterized by all of the above.
16) The long run period is the time period which
A. a firm is unable to vary some of its factors of production.

B. is sufficient enough to allow a firm to alter its plant capacity and all other factors of
production.
C. is sufficient enough for a firm to maximize its profits.
D. a firm is unable to maintain its profits.
17) The long run is a period of time for which
A. all resources are fixed.
B. the level of output is fixed.
C. the amount of all resources can be varied.
D. the size of the production plant is fixed.
18) When total product is at its maximum

A. the average product of labour is zero.
B. the marginal product of labour is zero.
C. the average product of labour is negative.
D. the average product of labour is declining
19) When a firm's total product is increasing in the short run, its marginal product
A. must be constant.
B. must be increasing.
C. must be decreasing.
D. must be negative.
20) The relationship between input and output is shown by the

A. cost function.
B. production function.
C. demand function.
D. supply function.
COST THEORY
1) Diseconomies of scale is the result of

A. discount given for bulk purchases
B. the use of by products
C. specialization in the use of machinery
D. inefficient management
2) A business maximizes profit by operating where

A. total revenue equals total cost
B. marginal revenue equals total revenue
C. total revenue exceeds total cost by the greatest amount
D. marginal revenue exceeds marginal cost by the greatest amount
3) The change in total cost resulting from a one-unit increase in production is called
A. average cost.
B. average variable cost.
C. total variable cost.
D. marginal cost.
4) Economies and diseconomies of scale are associated with

A. a downward and upward sloping of the long run average total cost curve
respectively.
B. a vertical long run average total cost curve.
C. a horizontal long run average total cost curve.
D. a persistent increase in the cost of production of a firm.
Use the following table to answer questions 8 and 9.
Output (per week) 0 1 2 3 4 5

Total Cost (RM) 40 44 52 58 62 66
5) What is the value of the firm's total fixed cost?

A. RM 4.00
B. RM4.04
C. RM40.40
D. RM40.00
6) If the output were 5 units per week, the average variable cost and average total cost would
be
A. RM 5.00 and RM 12.20 respectively.
B. RM 5.20 and RM 13.20 respectively.
C. RM 5.50 and RM 13.70 respectively.
D. RM 5.10 and RM 11.20 respectively.
7) Interest paid on a bank loan by a restaurant owner is

A. a variable cost to the owner.
B. an explicit cost to the owner.
C. an implicit cost to the owner.
D. neither an explicit nor an implicit cost to the owner.
8) A firm is experiencing diseconomies of scale in its production because

A. it has grown so large that average total cost increases as output expands.
B. it has grown so large that average total cost is constant as output expands.
C. it is operating at a scale where total fixed costs are not minimized.
D. it has grown so large that average total cost decreases as output expands.
9) Which of the following is an example of an implicit cost?

A. The cost of raw materials used to produce bread in a bakery.
B. The income an entrepreneur could have earned working in a bank.
C. The cost of labour in a factory that assembles DVD players.
D. None of the above.
10) The average total cost of producing computers in a factory is RM500 at the current
output level of 100 units per week. If fixed cost equals RM10,000,
A. average fixed cost equals RM10,000.
B. total cost equals RM60.000 per week.
C. variable cost equals RM50.000 per week.
D. average variable cost equals RM400.
11) The marginal cost of a good is

A. the addition to total cost of producing one more unit of output.
B. decreasing when average total cost is decreasing.
C. the difference between average total cost and average fixed cost.
D. always equal to average variable cost when the firm is maximizing profit.
12) Marginal cost can be defined as the

A. change in fixed cost resulting from one more unit of production.
B. difference between fixed and variable cost at any level of output.
C. amount which one more unit of output adds to total cost.
D. difference between price and average total cost at the profit maximizing level of output.
13) Which would contribute most to a firm experiencing "economies of scale"?

A. rising long run average costs.
B. Law of diminishing marginal returns.
C. specialization of production within a firm.
D. deterioration of information and control within a firm.
14) To maximize profit, a firm should adjust output until

A. marginal revenue equals marginal cost.
B. marginal revenue equals average cost.
C. price equals cost.
D. marginal revenue is greater than marginal cost.
15) If a firm decided to produce no output in the short run, its cost will be ………..
A. Zero
B. Its fixed cost
C. Its variable cost
D. Its marginal cost

Chapter 5 MCQ

Uploaded by

Copyright:

Available Formats

Chapter 5 MCQ

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 5 MCQ

Uploaded by

Copyright:

Available Formats

ECO 415 Production and Cost Theory

CHAPTER 6: PRODUCTION AND COST THEORY

3) Marginal product is:

5) Which of the following is NOT correct ?

6) The range of diminishing marginal productivity begins when

7) Fixed inputs are factors of production that:

10) The law of Diminishing marginal Return relates to the

11) In the long run, a firm can vary

12) The law of diminishing returns states that as

13) When total product is maximized

15) Production in the short run

16) The long run period is the time period which

A. a firm is unable to vary some of its factors of production.

18) When total product is at its maximum

20) The relationship between input and output is shown by the

1) Diseconomies of scale is the result of

2) A business maximizes profit by operating where

4) Economies and diseconomies of scale are associated with

Use the following table to answer questions 8 and 9.

Output (per week) 0 1 2 3 4 5

5) What is the value of the firm's total fixed cost?

7) Interest paid on a bank loan by a restaurant owner is

8) A firm is experiencing diseconomies of scale in its production because

9) Which of the following is an example of an implicit cost?

11) The marginal cost of a good is

12) Marginal cost can be defined as the

13) Which would contribute most to a firm experiencing "economies of scale"?

14) To maximize profit, a firm should adjust output until

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.