Topic 5 - Production & Costs
Topic 4: Production & Costs - Multiple Choice Exercise
Choose the correct answer for each question in the quiz
Economists define the short run production period as:
- That period of time when all factors of production are fixed.
- That period of time when at least one factor of production is fixed.
- That period of time when all factors of production are variable.
- That period of time when labour is fixed.
Which one of the following statements is true?
- If the marginal cost is greater than the average cost the average cost falls.
- If the marginal cost is greater than the average cost, the average cost increases.
- If the marginal cost is positive total costs are maximized.
- If the marginal cost is negative total costs increase at a decreasing rate if output increases.
A firm’s fixed costs are €200. Its total costs for one unit is €300 and €410 for two units of output. The MC of the second unit of output is:
- €100.
- €210.
- €200
- €110
If firms earn normal profits:
- They will aim to leave the industry.
- Other firms will join the industry.
- The total revenue equals total costs.
- No profit is made in accounting terms.
For increasing returns to scale to be present it must be the case that:
- Output increase more than proportionately when all inputs are increased by the same proportion.
- Output decreases more than proportionately when all inputs are increased proportionately.
- The percentage increase in output must be less than the percentage increase in inputs.
- Each of the above is correct.
Price (average revenue) equals:
- Total revenue - quantity.
- Total quantity sold * quantity sold.
- Total revenue / quantity sold.
- Total revenue / total cost.
Total costs increases from €500 to €600 when output increases from 20 to 30 units. Total fixed costs are €200. Which of the following is true?
- Marginal cost is €20.
- Average cost falls.
- Total variable cost rises by €100.
- Average fixed cost is €100.
If marginal revenue equals marginal cost:
- No profit is being made.
- Total revenue equals total cost.
- Profits are maximized.
- Producing another unit would increase profits.
Total revenue equals:
- Price plus the quantity.
- Price multiplied by the quantity sold.
- Price divided by the quantity sold.
- Price minus the quantity sold.
A firm’s fixed costs are €500. Its total costs are €700. What are the firm’s variable costs?
- €700.
- €200.
- €500.
- €400.
