TIONS 1 choice auestion (MCQ). lowing MultiPl riate answer of © t costs of a firm? Se ing is NOT included in the cexplici ” at (1) Which of the following (b) interest paid for borrowed ca, (a) _ wages paid 10 labour (normal profit it (c) payments for purchases of materials rmined bY: (oy number of consumers (@)In the long-run, price is dete (a) cost of production ‘tastes and fashion (g) competitive forcos n of a product? () influence o (3) Which of these is NOT 8 component of cost functo (@) market price of the product (bp) operating technology ofthe play (c) operating capacity (d)__alllofthe above (4) Afirm will hire a factor of production until the point at which: (a2) MC>MR (b) AC? AR () MC=MR @ — AR) Cs rasing when t cuts AC & AVC MC cuts AVC at its minimum point ©) PBA the abovePaper: 02 Business economics (23) At the output level of minimum efficient scale of a firm; (a) The unit cost is minimized because of economics of scale are maximized (b) The LRAC of a firm becomes parallel to x-axis (c) The unit cost is still falling (¢) —- Botha&b (24) If marginal revenue is Rs. 50 and marginal cost is Rs, 40, the firm seeking profit maximization woug (a) increase price (b) reduce output (©) reduce price (¢) —_Increase output (25) An employer employs 10 units of labour at a wage rate of Rs.560 per day. To attract one more unt fp, he raises the wage rate to Rs.570 per day. The marginal cost of employing an additional unit of labour ig: (a) Rs. 10 (b) Rs. 670 (c) Rs. 570 (9) Rs. 580 (26) Shahid has employed 25 workers to whom he pays wages at the rate of Rs. 160 per day. He is now intending increase the wage rate ofall workers by Rs. 20 per day in order to attract one additonal worker. Given hata other costs remain constant, the marginal cost of labour per day would be: (a) Rs. 20 (b) Rs. 170 (c) Rs. 670 @) Re. 4,420 (27) Which of the following will always Increase when ‘anufacturing business Increases Its output? (>) Marginal cost (a) Fixed costs (d) Average variable cost (c) Total costs (28) Diseconomies of scale occur when: (a) long run average costs begin to rise (b) (@) short run average costs begin to fall short run average costs begin to rise (@) long run average coats begin to fal (28) With 60 units of labour, 8 firm can produce 1,800 units of output. With 60 units of labour the firm can produce 2,100 units ‘of output. The marginal product of labour Is: (a) 0.33 ©) So (c) 30 @ level where: ao) Langvn average cot (URAC) wb imu te CHOU fc gyn tom ecm . deing tay both (a) and (b)() Botha &b (24) If marginal revenve is Rs (a) increase price 50 and Marginal cost is Rs 40, the firm Seek) as () reduce output no, (d) Mcr0880 out yy ey (25) An employer employs 10 unity Of labour at a wage rate of Rs 560 Per he raises the wage rate to Rs.570 Per day. The marginal cost of emotyne ° ong (a) Rs. 10 (b) Rs. 670 “ ow ‘ () Rs. 570 (@) Re. 680 . (26) Shahid has employed 25 workers to whom he pays wages ai other costs remain constant, jarginal cost of labour er day would be: (a) Rs. 20 (%) —-Rs.170 ‘ () Rs. 670 (a) Rs. 4,420 (27) Which of the following will always increase when a manufacturing business increases it (a) Fixed costs (b) Marginal cost (©) Total costs (d) Average variable cost Output? (28) Diseconomies of scale occur when: (a) long run average costs begin to rise (b) short run average costs begin to rise (c) long run average Costs begin to fall (d) short run average costs begin to fall (29) With 50 units of labour, a firm can Produce 1,800 units o f output. With 60 units of labour the firm can 2,100 units of output. The marginal product of labour is: _ (a) 0.33 (b) 3 (c) 30 (d) 300 (30) Long-run average cost (LRAC) will be minimum at the output level where: (a) LRTC is rising (b) the flattest tangent from the origin meats the Lat. (c) LRTCis flat (a) both (a) and (b) (31) When MC is greater than AC and AVC, each additional unit of Production will: (a) Increase the AC and AVC. (b) Decrease the AC and AVC. (c) Increase the AC but decrease AVC. (a) Decrease the AC and Increase AVC. (32) Which of the following statement is true? (a) MC falls if the variable factors of production show increasing return (b) MC increases if the variable factors of production show diminishing return (c) Both (a) and (b) (d) None of the above~~ ee ervsvsvvorvon (33) The following table shows the ible costs of a firm. Quantity produced (Units) ; Varlable costs( = 20 ~ ™ 41 30 . 12 40 : 13 50 How many units the firm produce to maximise ; profit if the price per unit is te ‘0 rd nit is Rs 5 and the fixed costs are Rs 107 @ ) 13 (34) The table shows total costs of a firm that sells output at Rs 6 per unit. Output (Units) Total costs(Rs) 0 40 10 100 20 120 30 150 g statement is true? lowest when 10 units are produced it when 20 units are sold Which one of the followin: (a) Average cost is (b) The firm does not make any profi (c) The firm has no fixed cost (a) Total variable costs fall continuously over thes (35) Which one of the following a! umptions Is related to (a) Continuous improvement In techniques of production (b) All factors ‘of production are proportionately varied (c) There is no scarcity of the factors of production (d) The factors are able to be combined to make @ product tatements Is correct? se outputs the law of variable proportion? (36) Which of the following $1 (a) When the average cost is constant, the marginal (b) When the average cost is rising, marginal cost is lower ee arginal cost is higher | cost must be falling than average cost than average cost30 0 ich one of the following statement is true? . ‘Average cost is lowest when 10 units are Produced The firm does not make any profit when 20 units are sold ‘The firm has no fixed cost (a) (b) () (¢) Total variable costs fall continuously over these outputs (gs) which cone of the following assumptions is related to the law of variable proportion? (a) Continuous improvement in techniques of production (b) Allfactors of production are proportionately varied (c)_ There is no scarcity of the factors of production (4) The factors are able to be combined to make a product (36) Which of the following statements is correct? (a) When the average cost is constant, the marginal cost must be falling (b) When the average cost is rising, marginal cost is lower than average cost (c) When the average cost is rising, marginal cost is higher than average cost (d) When the average cost is falling, marginal cost must be rising (37) If the price and marginal revenue are the same then demand curve must be: (a) Perfectly inelastic and vertical (b) Highly elastic and downward sloping (c) Perfectly elastic and horizontal (d) Highly inelastic and downward ‘sloping (38) Under perfect competition, the supply curve of a firm is equal to: (2) MR cure (b) AR curve (c) MC curve (d) AC curve (39) Economist profit is equal to: (a) Sales revenue minus explicit cost (©) Sales revenue minus implicit cost (c) Accountant profit minus explicit cost (d) Accountant profit minus implicit cost ; -_Paper: 02 Business economics (40). The table shows the output and total f all firm. ‘ ofa Output (Units) Total costs(Rs) 0 50000 1000 100000 5000 400000 10000 600000 What is the average fixed cost of producing 10 000 units? (a) Rs60 (bk) Rs85 (e) Rs6 (d) Rs& $e(45) (a) | (46) (a) 6 PRODUCTION, COST & REVENUES {@ @ Je) (a) [o {(d) (6) (a) [) (c) (10) (dy) a3) (d)—«4f(t4)——e) Sd (18) (a) [ (22) _(d) [ (25) (26) (c) (29) (c) ‘| (30) (by [G3) (a) (34) (b) [67 (38) (c)i mete : 2) TT TR equals TC he TR curve and TC curve are paral} 0 ge TR uve and TC cUVE are parallel and TC exceeds TR © pe TReuve and TC curve are parallel and TR exceeds te id) increases, @ firms short-rum marginal cos! gas ou one of scale will eventually increase because of wy ssecone (b) A lower product price me firm's need to break even (d) Diminishing returns pe short-run average cost curve is, 4) (e) Upward sloping (©) Downward sloping fo _Ushaped (@) straight tine y vp erasing long-run average costs are associated with ( ' (a) Law of diminishing return (b) Constant returns to scale (@) Increasing returns to scale (Decreasing returns to scale saya proft maximising firm will produce output where: ( Total sales are maximised (b) Average total costs are minimised Marginal cost equals marginal revenue (d) Average revenue is maximized (a) (c) 17) The productivity of an input is NOT affected by: (a) Technological change (b) Economies of scale (c) Advances in knowledge (4) Diminishing returns (18) Marginal Revenue is greater than zero if: (a) the elasticity of demand is greater than one (b) the elasticity of demand is less than one (c) _ the elasticity of demand is one (@) none of the above ('9) Which of these costs will increase or decrease with increase or decrease in production levels? (2) Marginal cost (b) Fixed cost (0) Financial cost (d) All of the above (20) ABC Limited employs 100 skilled workers at a wage rate of Rs. 2,800 per week. To attract 10 more workers it raises the wage rate to Rs. 3,000 per week. The marginal cost of employing the extra workers is nw (2) Rs. 20,000 (b) Rs. 30,000 (c) Rs. 50,000 (4) Rs. 200 (24) Which of the following statement is correct with respect to relationship between the average cost curve and marginal cost? (2) Average cost curve will slope downwards when marginal cost is less than average cost (>) Average cost curve will slope upwards when marginal cost is less than average cost cost (1 Average cost curve will slope downwards when marginal cost is more than average '®) There is no direct relationship between average cost curve and marginal cost rage variable 2) Which one ofthe following statements is true for marginal cost (MC), average cost (AC) and ¥er29 COSt(AVC) of a firm? (a) () (b) MCs raising when it cuts AC & AVC MC cuts AC at the minimum point (a) All of the above MC cuts AVC at its minimum point AL we —