Cost-1

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1. If an industry is characterized by economies of scale then-
(A) Barriers to entry are not very large
(B) Long run unit costs of production decreases as the quantity the firm produces increases
(C) Capital requirement are small due to the efficiency of the large scale operation
(D) The costs of entry into the market are likely to be substantial
Ans. (B)

2. Transfer earning or alternative cost is otherwise known as-
(A) Variable cost
(B) Implicit cost
(C) Explicit cost
(D) Opportunity cost (economic cost)
Ans.(D)

3. Prime cost is equal to-
(A) Variable cost plus administrative cost
(B) Variable cost plus fixed cost
(C) Variable cost only
(D) Fixed cost only
Ans. (C)

4. When average cost production (AC) falls, marginal cost of production must be-
(A) Rising
(B) Falling
(C) Greater than the average cost
(D) Less than the average cost
Ans. (D)

5. The ‘Break-even’ point is where-
(A) Marginal revenue equals marginal cost
(B) Average revenue equals average cost
(C) Total revenue equals total cost
(D) None of the above
Ans. (C)

6. As output increases, average fixed cost-
(A) Increases
(B) Falls
(C) Remains constant
(D) First increases, then falls
Ans.(B)
.
7. The situation in which total revenue is equal to total cost, is known as-
(A) Monopolistic competition
(B) Equilibrium level of output
(C) Break-even point
(D) Perfect competition
Ans. (C)

8. Selling cost means-
(A) Cost of selling a product
(B) Cost incurred in transportation
(C) Cost Incurred in advertisement
(D) Cost Incurred on factors of production
Ans. (C)

9. Under full cost pricing price is determined-
(A) By adding a margin to the average cost
(B) By comparing marginal cost and marginal revenue
(C) By adding normal profit to the marginal cost
(D) By the total cost of production
Ans. (A)

10. Which of the following is not a fixed cost?
(A) Salaries of administrative staff
(B) Rent of factory building
(C) Property taxes
(D) Electricity charges
Ans. (D)

11. The expenses on advertising to called-
(A) Implicit cost
(B) Surplus cost
(C) Fixed cost
(D) Selling cost
Ans. (D)

12. The addition to total cost by producing an additional unit of output by a firm is called-
(A) Variable cost
(B) Average cost
(C) Marginal cost
(D) Opportunity cost
Ans. (C)

13. The opportunity cost of a factor of production is-
(A) What it is earning in its present use
(B) What it can earn in the long period
(C) What has to paid to retain it in its present use
(D) What it can earn in some other use
Ans. (D)

14. Consumer gets maximum satisfaction at the point where-
(A) Marginal Utility = Price
(B) Marginal Utility > Price
(C) Marginal Utility < Price (D) Marginal Cost = Price Ans. (A) 15. Which of the following costs is related to marginal cost? (A) Variable Cost (B) Implicit Cost (C) Prime Cost (D) Fixed Cost Ans. (A) 16. Average Fixed Cost Curve is- (A) Upward sloping (B) ‘U’ shaped (C) ‘V’ shaped (D) Downward sloping Ans. (D) 17. Selling cost have to be incurred in case of- (A) Perfect competition (B) Monopoly (C) Monopolistic Competition (D) None of the given options Ans. (C) 18. A beedi making workshop can hire 5 women by paying them Rs. 300 per day. The 6th woman demands Rs. 350 per day. If this woman is hired then all other women must be paid Rs. 350 The marginal resource (labour) cost of the 6th woman is- (A) Rs. 600 (B) Rs. 50 (C) Rs. 100 (D) Rs. 300 Ans. (A) 19. If quantity of good X demanded increases from 2300 to 2700 when price of good Y increases from Rs. 45 to Rs. 55, find Arc Cross elasticity of demand? (A) 4 (B) 1.25 (C) 0.25 (D) 0.8 Ans. (D) 20. If the average total cost are Rs 54, average variable cost is Rs 36 and quantity produced is 2500 units, find the total fixed costs (in Rs) of the firm? (A) 30000 (B) 15000 (C) 45000 (D) 60000 Ans. (C) 21. If the average total cost are Rs 54, total fixed cost is Rs 45000 and quantity produced is 2500 units, find the average variable costs (in Rs) of the firm? (A) 24 (B) 18 (C) 36 (D) 60 Ans. (C). 22. If the breakeven quantity for a factory whose variable cost of manufacturing a cell is Rs. 15 and selling price is Rs. 24. Total quantity produced is 2,400 units, find the fixed cost of the factory? (A) Rs. 21600 (B) Rs. 36000 (C) Rs. 57600 (D) Rs. 14400 Ans. (A) 23. A price floor is _____. (A) A maximum legal price (B) A minimum legal price (C) The price where demand equals supply (D) The price where elasticity of demand equals elasticity of supply Ans. (B) 24. A hand made paper workshop can hire 8 craftsmen by paying them Rs 400 per person per day. The 9th craftsman demands Rs 450 per day. If this craftsman is hired then all other craftsmen must be paid Rs 450. The marginal resource (labour) cost of the 9th craftsman is- (A) Rs 50 (B) Rs 850 (C) Rs 800 (D) Rs 100 Ans. (B) 25. Calculate the accounting profits for a firm, if its economic profits for the year are Rs 60 crores, total implicit costs are Rs 18.5 crores and total explicit costs are Rs 35 crores. (A) Rs 113.5 crores (B) Rs 43.5 crores (C) Rs 76.5 crores (D) Rs 78.5 crores Ans. (D) 26. If the average total cost are Rs 2400, average variable cost is Rs 1700 and quantity produced is 75 units, find the total fixed costs of the firm? (A) Rs 52500 (B) Rs 127500 (C) Rs 180000 (D) Rs 60000 Ans. (A) 27. If the average total cost are Rs. 1700, total fixed cost is Rs. 52500 and quantity produced is 75 units, find the average variable costs of the firm? (A) Rs. 1000 (B) Rs. 2400 (C) Rs. 1800 (D) Rs. 600 Ans. (A) 28. Calculate the economic profit for a firm if its total revenues are Rs. 180 crores, explicit costs are Rs. 95 crores, and implicit costs are Rs. 25 crores. (A) Rs. 110 crores (B) Rs. 300 crores (C) Rs. 60 crores (D) Rs. 250 crores Ans. (C) 29. If the break even quantity for a factory whose variable cost of manufacturing a tube light is Rs. 35 per unit and selling price is Rs. 50 per unit. Total quantity produced is 600 units, find the fixed cost of the factory? (A) Rs. 30000 (B) Rs. 21000 (C) Rs. 51000 (D) Rs. 9000 Ans. (D) 30. For each perfectly competitive firm in the long run (A) Price = marginal costs = average variable costs (B) Price = average profit (C) Price = marginal costs = minimum average total costs (D) Price = minimum average variable costs Ans. (C)

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