Multiple Choice Questions
r- Which ofthe following is a variable cost? A- Interest payments B- Rawmaterials costs C- Property taxes D- All ofthe above are variable costs 2- Which ofthe following is animplicit cost? A- The salary eamedby a corporate executive B- Depreciation in the value ofa comparry-ownedcar as it wears out C- Property taxes D- All ofthe above are implicit costs 3- Short-run average variable cost is equalto A- Totalvariable cost dividedby output. B- Average total cost minus average fixed cost. C- The cost per unit ofthe variable input divided by the average product ofthe variable input. D- All ofthe above 4- Which ofthe following short-run cost curves declines continuously? A- Average total cost B- Marginal cost C- Average fixed cost D- Average variable cost 5- The long-run average cost curve is at aminimum at a level ofoutput where A- The firm is experiencing constant retums to scale B- Itis equal to long-runmarginal cost. C- The long-run average cost curve is tangent to the lowest point on a short-un average total D- All ofthe above occur. cost curve
Solution
Ans. 1 (B) As you purchase more rawmaterials, cost rises.
2. (B) Implicit cost
3. (D) All describes short run AVC.
4. (C) Average fixed cost = TFC/Q , where total fixed cost is constant, as Q rises, AFC falls.
5. (D)
6. (C) Natural monopoly, implies more can be produces at decreasing cost.
7. (C)
8. (B)
9. (D)
10. (B)
11. (B)
12. (B) They remain fixed, independent of change in output. But in long run, all costs are variable.
13. (B)
14. (B)
15. -
16. (B)
17. (A)
18. (A), their profit maximization condition is, Marginal Revenue = Marginal Cost
19. (C)
20. (A) , profits will be maximum at this point.
.
Multiple Choice Questions r- Which ofthe following is a variable cost-.docx
1. Multiple Choice Questions
r- Which ofthe following is a variable cost? A- Interest payments B- Rawmaterials costs C-
Property taxes D- All ofthe above are variable costs 2- Which ofthe following is animplicit cost?
A- The salary eamedby a corporate executive B- Depreciation in the value ofa comparry-
ownedcar as it wears out C- Property taxes D- All ofthe above are implicit costs 3- Short-run
average variable cost is equalto A- Totalvariable cost dividedby output. B- Average total cost
minus average fixed cost. C- The cost per unit ofthe variable input divided by the average
product ofthe variable input. D- All ofthe above 4- Which ofthe following short-run cost curves
declines continuously? A- Average total cost B- Marginal cost C- Average fixed cost D- Average
variable cost 5- The long-run average cost curve is at aminimum at a level ofoutput where A-
The firm is experiencing constant retums to scale B- Itis equal to long-runmarginal cost. C- The
long-run average cost curve is tangent to the lowest point on a short-un average total D- All ofthe
above occur. cost curve
Solution
Ans. 1 (B) As you purchase more rawmaterials, cost rises.
2. (B) Implicit cost
3. (D) All describes short run AVC.
4. (C) Average fixed cost = TFC/Q , where total fixed cost is constant, as Q rises, AFC falls.
5. (D)
6. (C) Natural monopoly, implies more can be produces at decreasing cost.
7. (C)
8. (B)
9. (D)
10. (B)
2. 11. (B)
12. (B) They remain fixed, independent of change in output. But in long run, all costs are
variable.
13. (B)
14. (B)
15. -
16. (B)
17. (A)
18. (A), their profit maximization condition is, Marginal Revenue = Marginal Cost
19. (C)
20. (A) , profits will be maximum at this point.
