Question 1

When individuals income falls (everything remain the same) his demand for a normal good
A)rises
B)falls
C)remains the same
D)negative

Accepted Answer

When an individual's income falls, their demand for a normal good typically decreases because they have less purchasing power to spend on goods that are not considered necessities.

Question 2

Cardinal utility analysis to consumer equilibrium was developed by
A)marshall
B)hicks and allen
C)geremy bentham
D)gossen

Accepted Answer

Cardinal utility analysis, which is a way to quantify the satisfaction or utility that consumers derive from consuming goods and services, was developed by Alfred Marshall. He introduced concepts like marginal utility and consumer's surplus in his analysis.

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

Accepted Answer

Marginal cost (MC) is the additional cost incurred by producing one more unit of a good or service. It is given by the slope of the total cost (TC) curve or the total variable cost (TVC) curve at any level of output, as both TC and TVC curves represent the total costs that change with the level of output. The total fixed cost (TFC) curve is not related to MC as it remains constant regardless of the level of output.

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

Accepted Answer

The answer of If a firm's average cost is Rs.32...

Question 5

The cost that cannot be recovered once spent
A)accounting cost
B)fixed cost
C)implicit cost
D)sunk cost

Accepted Answer

The answer of The cost that cannot be recovered once...

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

Accepted Answer

The answer of The saucer-type of modern Short run Average...

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

Accepted Answer

The answer of The Long run Average Cost curve (LAC)...

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

Accepted Answer

The answer of Under increasing returns to scale, which of...

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

Accepted Answer

The average variable cost curve typically has a U shape due to initially decreasing costs with increased production, followed by increasing costs as diminishing returns set in.

Question 10

Average Fixed Cost (AFC) curve will always be
A)rectangular hyperbola
B)u shaped
C)horizontal
D)downward sloping

Accepted Answer

The Average Fixed Cost (AFC) curve is always downward sloping because as output increases, the fixed cost is spread over more units, causing the average fixed cost per unit to decrease.

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

Accepted Answer

The answer of Implicit cost of a factor of production...

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

Accepted Answer

Economic cost includes both explicit costs (direct, out-of-pocket payments) and implicit costs (the opportunity costs of using resources owned by the firm for its current purpose rather than the next best alternative).

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

Accepted Answer

The U shape of the Marginal Cost (MC) curve reflects the law of variable proportions, which states that as more of a variable input (like labor) is added to a fixed input (like machinery), the additional output from each new unit of input will eventually decrease after a certain point. This phenomenon explains why the MC curve typically decreases initially (due to increasing returns), reaches a minimum point, and then increases (due to diminishing returns).

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

Accepted Answer

The answer of Envelope curve is
A)long run marginal cost curve
B)long...

Question 15

In long run, which factor of production is fixed?
A)labour
B)capital
C)building
D)none of the above

Accepted Answer

The answer of In long run, which factor of production...

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

Accepted Answer

The answer of The U shape of the average total...

Question 17

The total fixed cost is a
A)horizontal straight line
B)vertical
C)hyperbola
D)u shaped

Accepted Answer

Total fixed cost is constant regardless of the level of output, so it is represented by a horizontal straight line on a graph.

Question 18

When AC minimum in short run
A)ac < mc
B)ac > mc
C)ac = mc
D)any of above is possible

Accepted Answer

The answer of When AC minimum in short run
A)ac <...

Question 19

The shape of TVC and TC are
A)rectangular hyperbola
B)inverse 's' shape
C)horizontal straight line
D)l shaped

Accepted Answer

TVC is a rectangular hyperbola and TC is an inverse 's' shape.

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

Accepted Answer

The answer of The cost expressed not in terms of...

Quiz 1: Cost and Demand Analysis in Economics

When individuals income falls (everything remain the same) his demand for a normal good

Cardinal utility analysis to consumer equilibrium was developed by

MC at any level of output is given by

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

The cost that cannot be recovered once spent

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

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

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

Which of the following has a U shape?

Average Fixed Cost (AFC) curve will always be

Implicit cost of a factor of production is determined by its

Economic cost include both

The U shape of MC curve reflects

Envelope curve is

In long run, which factor of production is fixed?

The U shape of the average total cost curve reflects

The total fixed cost is a

When AC minimum in short run

The shape of TVC and TC are

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