Firm's Cost Structure and Production Economics Quiz

Test your knowledge on cost structure, production functions, and economic optimization with these insightful questions in production economics.

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Which of the following is a fixed cost for a manufacturing firm?

Raw materials

Labor wages

Rent for factory building

Electricity bill

What is the concept of economies of scale in production?

As production increases, average total cost per unit decreases.

As production increases, average total cost per unit remains constant.

As production increases, average variable cost per unit increases.

As production increases, average fixed cost per unit decreases.

Which production function exhibits constant returns to scale?

Linear production function

Cobb-Douglas production function

Quadratic production function

Exponential production function

What is the key difference between explicit costs and implicit costs in economics?

Explicit costs are associated with monetary payments, while implicit costs are not.

Implicit costs are fixed, while explicit costs are variable.

Explicit costs are long-term, while implicit costs are short-term.

Implicit costs are associated with monetary payments, while explicit costs are not.

What is the relationship between average variable cost and marginal cost?

They are always equal.

Average variable cost is always higher than marginal cost.

Average variable cost is always lower than marginal cost.

There is no consistent relationship between them.

What is the formula for calculating total cost in economics?

Total Cost = Fixed Cost + Variable Cost

Total Cost = Fixed Cost - Variable Cost

Total Cost = Fixed Cost * Variable Cost

Total Cost = Variable Cost / Fixed Cost

What does the law of diminishing marginal returns state?

As production increases, marginal cost decreases.

As production increases, total cost remains constant.

As more units of a variable input are added to fixed inputs, the marginal product of the variable input will eventually decline.

As production increases, average total cost increases.

Which cost is also known as avoidable cost or escapable cost?

Fixed cost

Variable cost

Sunk cost

Opportunity cost

What is the primary objective of cost-benefit analysis in economics?

Maximizing costs

Minimizing benefits

Comparing the total benefits to the total costs of an economic decision

Ignoring costs and focusing only on benefits

#10

What is the primary goal of cost minimization in economics?

Minimizing fixed costs

Minimizing variable costs

Minimizing total costs

Minimizing average costs

#11

In the long run, all costs are considered to be:

Fixed costs

Variable costs

Opportunity costs

Marginal costs

#12

What is the relationship between marginal cost and average variable cost?

They are always equal.

Marginal cost is always higher than average variable cost.

Marginal cost is always lower than average variable cost.

There is no consistent relationship between them.

#13

Which of the following is an example of a variable cost for a service-based firm?

Rent for office space

Hourly wages for customer service representatives

Insurance premium

Depreciation of office equipment

#14

What is the concept of opportunity cost?

The actual cost incurred in production

The cost of the next best alternative foregone when a decision is made

The total cost of production

The variable cost of production

#15

Which cost is relevant for short-run production decisions?