Firm Economics and Production Costs Quiz
Test your knowledge on cost analysis, perfect competition, economies of scale & more with these 15 questions!
#1
Which of the following is a characteristic of perfect competition?
Many buyers and one seller
Many buyers and many sellers
One buyer and many sellers
One buyer and one seller
#2
Which of the following is not a fixed cost?
Rent
Salaries of permanent employees
Raw materials
Depreciation
#3
Which of the following is an example of a variable input in the short run?
Factory building
Raw materials
Machinery
Labor
#4
What is the concept that indicates the percentage change in quantity supplied in response to a percentage change in price?
Elasticity of demand
Elasticity of supply
Income elasticity
Cross-price elasticity
#5
What is the formula to calculate total cost?
Total Cost = Total Fixed Cost / Quantity
Total Cost = Total Variable Cost / Quantity
Total Cost = Total Fixed Cost + Total Variable Cost
Total Cost = Total Variable Cost - Total Fixed Cost
#6
What does the law of diminishing returns state?
As production increases, total cost decreases.
As production increases, total cost remains constant.
As production increases, total cost increases at a decreasing rate.
As production increases, total cost increases at an increasing rate.
#7
Which cost is also known as avoidable cost?
Fixed cost
Variable cost
Opportunity cost
Marginal cost
#8
What does economies of scale refer to?
When the long-run average total cost decreases as output increases.
When the long-run average total cost increases as output increases.
When the long-run average total cost remains constant as output increases.
When the long-run average total cost fluctuates as output increases.
#9
What is the formula to calculate average variable cost?
Average Variable Cost = Total Variable Cost / Quantity
Average Variable Cost = Total Variable Cost - Total Fixed Cost
Average Variable Cost = Total Variable Cost + Total Fixed Cost
Average Variable Cost = Total Fixed Cost / Quantity
#10
What is the relationship between marginal cost and average total cost when average total cost is at its minimum?
Marginal cost equals average total cost.
Marginal cost is greater than average total cost.
Marginal cost is less than average total cost.
Marginal cost approaches zero.
#11
In the short run, a firm should shut down if:
Variable costs exceed total revenue.
Total revenue exceeds fixed costs.
Marginal revenue is equal to marginal cost.
Average total cost exceeds marginal revenue.
#12
What is the relationship between marginal cost and average variable cost?
When marginal cost is less than average variable cost, average variable cost decreases.
When marginal cost is greater than average variable cost, average variable cost decreases.
When marginal cost is less than average variable cost, average variable cost increases.
There is no relationship between marginal cost and average variable cost.
#13
What does the long-run average total cost curve look like under constant returns to scale?
U-shaped
L-shaped
Downward sloping
Upward sloping
#14
What does the short-run average total cost curve initially exhibit?
Increasing returns to scale
Decreasing returns to scale
Constant returns to scale
Economies of scale
#15
In the long run, a firm should exit the market if:
Total revenue exceeds total costs.
Average total cost exceeds marginal revenue.
Average variable cost is equal to price.
Average total cost is less than average variable cost.
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