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43. Depreciation is loss in value of-
(A) Final goods
(B) Machinery
(C) Capital stock
(D) Stock of inventory
Ans. (B)

44. If the fixed costs of a factory producing candles is Rs 20,000, selling price is Rs 30 per dozen candles and variable cost is Rs 1.5 per candle, what is the break-even quantity?
(A) 20000
(B) 10000
(C) 15000
(D) 12000
Ans. (A)

45. A minimum wage _____
(A) Is the price floor below which workers may not sell their labor
(B) Is set at a price below the equilibrium wage
(C) Creates a price ceiling below which the wage cannot legally go
(D) Decreases unemployment
Ans. (A)

46. For a certain shoe factory the fixed costs are Rs 200,000, selling price is Rs 2000 per pair
of shoes and variable cost is Rs 1200 per pair, what is the breakeven quantity?
(A) 100
(B) 62.5
(C) 167
(D) 250

47. Insure payment of minimum wages for tea leave pickers-
(A) Will improve quality of tea.
(B) Will reduce unemployment of tea leave pickers.
(C) Decreases unemployment.
(D) Will increase picking cost for all tea companies.
Ans. (D)

48. Which of the following is false about minimum wages?
(A) A minimum wage law benefits all unskilled workers.
(B) A minimum wage harms firms by forcing them to pay higher wages.
(C) A minimum wage harms customers because
the law usually leads to higher product prices.
(D) A minimum wage increases unemployment.
Ans. (B)

49. 7 workers work in a printing press. Each gets paid Rs 450 per day. The 8th worker demands
Rs 500 per day. If this worker is hired then all other workers must be paid Rs 500. The
marginal resource (labour) cost of the 8th worker is _______.
(A) Rs 50
(B) Rs 850
(C) Rs 400
(D) Rs 100
Ans. (B)

50. Which among of the following is a factor of production?
(A) Coal
(B) Entrepreneur
(C) Energy
(D) Industry
Ans. (B)

51. Which activity is not included in production?
(A) Production of wheat by a farmer
(B) Production of medicines by a company
(C) Services given by a nurse in hospital
(D) Services done by a house-wife in her own house
And. (D)

52. Returns to scale is a-
(A) Timeless phenomenon
(B) Directionless phenomenon
(C) Short run phenomenon
(D) Long run phenomenun
Ans. (D)

53. Internal economies-
(A) Arise when there is expansion in an industry
(B) Arise in an economy as it makes progress
(C) Accrue to a firm when it expands its output
(D) Arise when there is expansion in internal trade
Ans. (A)

54. Third situation of law of variable proportion is-
(A) Negative return
B) Positive return
(C) Proportional return
(D) None of these
Ans. (A)

55. The excess of the price, person is to pay rather than forego the consumption of the commodity is called-
(A) Price
(B) Profit
(C) Producer’s surplus
(D) Consumer’s surplus
Ans. (C)

56. Production function means-
(A) Relation between land & rent.
(B) Relation between initial input & ultimate output
(C) Relation between demand & supply
(D) Relation between output and export
Ans. (B)

57. When the marginal pro(duct of labour is greater than the average product of labour-
(A) The total product curve is negatively sloped
(B) The average product of labour is increasing
(C) The firm is experiencing diminishing returns
(D) The marginal product of labour is increasing
Ans. (B)

58. Economies of scale exists when-
(A) The firm is too small and too specialised
(B) The long-run cost of producing a unit of output falls as the output increases
(C) The cost of finding a trading partner is low.
(D) A firm’s decision to hire additional inputs does not result in an increase in the price of inputs
(E) The firm is too large and too diversified
Ans. (B)

59. The Product: Economies of scale is a situation in economics when ion function signifies-
(A) Economical relation
(B) Social relation
(C) Industrial relation
(D) Cost relation
Ans. (C)
60. Indicate below what is NOT a factor of production-
(A) Land.
(B) A bank loan.
(C) Labor.
(D) Capital.
Ans. (B)

61. The least cost combination of-factors or producer’s equilibrium is now explained with the help of ………….. curvesand iso costs.
(A) Iso product
(B) Iso process
(C) Both(A) and (B)
(D) None of these
Ans. (A)

62. When the total product rises at an increasing rate, then the-
(A) Marginal product is zero
(B) Marginal product is rising
(C) Marginal product is falling
(D) Marginal product remains constant
Ans. (B)

63. In Economics, Production means-
(A) Manufacturing
(B) Making
(C) Creating utility
(D) Forming
Ans. (C)

64. The marginal propensity to consume lies between-
(A) 0 to 1
(B) 0 to 
(C) 1 to 
(D)  to 
Ans. (A)

65. The production function relates to-
(A) Costs to outputs
(B) Costs to inputs
(C) Inputs to outputs
(D) Wage level to profits
Ans. (C)

66. Isoquants that are downward-sloping straight lines imply that the inputs-
(A) Are perfect substitutes.
(B) Are imperfect substitutes.
(C) Cannot be used together.
(D) Must be used together in a certain proportion.
Ans. (A)

67. It is prudent to determine the size of the output when the industry is operation in the stage of-
(A) Increasing returns
(B) Constant returns
(C) Diminishing returns
(D) Negative returns
Ans. (C)

68. The four factors of production are-
(A) Land, Labour, Capital, Organisation
(B) Land, Electricity, Water, Labour
(C) Labour, Capital, Land, Rainfall
(D) Labour, Climate, Land, Tools
Ans. (A)

69. Minimum payment of factor of production is called-
(A) Quasi Rent
(B) Rent
(C) Wages
(D) Transfer Payment
Ans. (D)

70. Surplus earned by a factor other than land in the short period is referred to as-
(A) Economic rent
(B) Net rent
(C) Quasi-rent
(D) Super-normal rent
Ans. (C)
71. An isoquant represents levels of capital and labor that-
(A) have constant marginal productivity.
(B) yield the same level of output.
(C) incur the same total cost.
(D) All of the above.
Ans. (B)

72. Given the money wages, if the price level in an economy increases, then the real wages will-
(A) Increase
(B) Decrease
(C) Remain constant
(D) Become flexible
Ans. (B)

73. Quasi rent is a ________ phenomenon.
(A) Medium
(B) Long-term
(C) Short-term
(D) No time
Ans. (C)

74. Which of the following statements best describes a production function?
(A) the maximum profit generated from given levels of inputs
(B) the maximum level of output generated from given levels of inputs
(C) all levels of output that can be generated from given levels of inputs
(D) all levels of inputs that could produce a given level of output
Ans. (B)

75. Returns to scale refers to the change in output when-
(A) all inputs increase proportionately.
(B) labor increases holding all other inputs fixed.
(C) capital equipment is doubled.
(D) specialization improves.
Ans. (A)

76. __________ says that if we keep increasing the employment of an input, with other inputs fixed, eventually a point will be reached after which the resulting addition to output (i.e. marginal
product of that input) will start falling.
(A) Law of diminishing marginal product
(B) Law of variable proportions
(C) The Short Run
(D) The Long Run
Ans. (A)

77. _________ says that the marginal product of a factor input initially rises with its employment
level. But after reaching a certain level of employment, it starts falling.
(A) Law of diminishing marginal product
(B) Law of variable proportions
(C) The Short Run
(D) The Long Run
Ans. (B)
78. _________ is the relationship between the variable input and output, keeping all other inputs are heldconstant.
(A) Total product
(B) Average product
(C) Isoquant
(D) The Long Run
Ans. (A)

79. ___________ is the set of al l possible combinations of the two inputs that yield the same maximum possible level of output.
(A) The Short Run
(B) The Long Run
(C) Isoquant
(D) Average product
Ans. (C)

80. __________ of an input is defined as the change in output per unit of change in the input when all other inputs are held constant.
(A) Marginal product
(B) Production function
(C) Total product
D) Average product
Ans. (A)

81. The _________ of a firm is a relationship between inputs used and output produced by the firm.
(A) Marginal product
(B) Production function
(C) Total product
(D) Average product
Ans. (B)

82. __________ is defined as the output per unit of variable input
(A) Marginal product
(B) Production function
(C) Total product
(D) Average product
Ans. (D)

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