Deck 3: Cost Theory and Production Possibility Curve Analysis

Question 1

The concept of utility was introduced by

A)marshall
B)hicks and allen
C)geremy bentham
D)gossen

Answer 1

geremy bentham

Question 2

Cardinal utility analysis to consumer equilibrium was developed by

A)marshall
B)hicks and allen
C)geremy bentham
D)gossen

Answer 2

marshall

Question 3

MC at any level of output is given by

A)slope of tc curve
B)slope of tvc curve
C)slope of either tc or tvc
D)slope of tfc

Answer 3

slope of either tc or tvc

Question 4

If a firm's average cost is Rs.32 at 6 units of output and Rs.34 at 7 unit, which one among the following is the marginal cost of producing the 7th unit

A)46
B)2
C)36
D)42

Question 5

The cost that cannot be recovered once spent

A)accounting cost
B)fixed cost
C)implicit cost
D)sunk cost

Question 6

The saucer-type of modern Short run Average Variable Cost (SAVC) represents

A)excess capacity
B)managerial costs
C)load factors
D)reserve capacity

Question 7

The Long run Average Cost curve (LAC) in modern cost theory is roughly

A)u shaped
B)saucer shaped
C)l shaped
D)rectangular hyperbola

Question 8

Under increasing returns to scale, which of the following is the nature of the long run average cost curve?

A)downward sloping
B)upward rising
C)parallel to output axis
D)identical to short run average cost curve

Question 9

Which of the following has a U shape?

A)average fixed cost curve
B)total cost curve
C)average variable cost curve
D)total variable cost curve

Question 10

AFC curve will always be

A)rectangular hyperbola
B)u shaped
C)horizontal
D)downward sloping

Question 11

Implicit cost of a factor of production is determined by its

A)sunk cost
B)variable cost
C)fixed cost
D)opportunity cost

Question 12

Economic cost include both

A)explicit cost and implicit cost
B)fixed cost and variable cost
C)explicit cost and prime cost
D)money cost and sunk cost

Question 13

The U shape of MC curve reflects

A)economies of scale
B)law of increasing returns
C)reserve capacity
D)law of variable proportion

Question 14

Envelope curve is

A)long run marginal cost curve
B)long run average cost curve
C)total cost curve
D)none of the above

Question 15

In long run, which factor of production is fixed?

A)labour
B)capital
C)building
D)none of the above

Question 16

The U shape of the average total cost curve reflects

A)ldmu
B)the law of variable proportions
C)consumer's surplus
D)reserve capacity

Question 17

The total fixed cost is a

A)horizontal straight line
B)vertical
C)hyperbola
D)u shaped

Question 18

When AC minimum in short run

A)ac < mc
B)ac > mc
C)ac = mc
D)any of above is possible

Question 19

The shape of TVC and TC are

A)rectangular hyperbola
B)inverse 's' shape
C)horizontal straight line
D)l shaped

Question 20

The cost expressed not in terms of money but in terms of efforts of workers undergone for making the commodity

A)opportunity cost
B)real cost
C)sacrifice cost
D)implicit cost

Question 21

The MC curve cuts the AC curve at

A)the maximum point
B)the initial point
C)the minimum point
D)any point

Question 22

The minimum point of ATC is at ...................position of the minimum point of AVC

A)right
B)left
C)same
D)all of above can be

Question 23

If the long run cost curve shifts down wards it is an indication of

A)technological progress
B)lower factor prices
C)both of these
D)reserve capacity

Question 24

The U shape of the LAC reflects

A)law of variable proportions
B)laws of returns to scale
C)reserve capacity
D)none of these

Question 25

A production possibility curve is concave to the point of origin because of

A)increasing marginal rate of transformation (mrt)
B)increasing marginal opportunity cost (moc)
C)both of the above
D)decreasing marginal rate of transformation