#1
Which of the following is a fixed cost for a manufacturing firm?
Rent for factory building
ExplanationCost that remains constant regardless of production levels.
#2
What is the concept of economies of scale in production?
As production increases, average total cost per unit decreases.
ExplanationCost per unit decreases with increased production.
#3
Which production function exhibits constant returns to scale?
Cobb-Douglas production function
ExplanationOutput increase proportionally with input increase.
#4
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.
ExplanationMonetary vs. non-monetary costs.
#5
What is the relationship between average variable cost and marginal cost?
Average variable cost is always lower than marginal cost.
ExplanationAverage vs. additional cost.
#6
What is the formula for calculating total cost in economics?
Total Cost = Fixed Cost + Variable Cost
ExplanationCombination of fixed and variable costs.
#7
What does the law of diminishing marginal returns state?
As more units of a variable input are added to fixed inputs, the marginal product of the variable input will eventually decline.
ExplanationOutput increase slows as one input is added to a fixed quantity of other inputs.
#8
Which cost is also known as avoidable cost or escapable cost?
Sunk cost
ExplanationCost that cannot be recovered.
#9
What is the primary objective of cost-benefit analysis in economics?
Comparing the total benefits to the total costs of an economic decision
ExplanationAssessing whether benefits outweigh costs.
#10
What is the primary goal of cost minimization in economics?
Minimizing total costs
ExplanationReducing overall expenditure.
#11
In the long run, all costs are considered to be:
Variable costs
ExplanationCosts that vary with the level of output.
#12
What is the relationship between marginal cost and average variable cost?
They are always equal.
ExplanationAverage variable cost equals marginal cost.
#13
Which of the following is an example of a variable cost for a service-based firm?
Hourly wages for customer service representatives
ExplanationCosts that vary with the level of service provided.
#14
What is the concept of opportunity cost?
The cost of the next best alternative foregone when a decision is made
ExplanationValue of the best alternative forgone.
#15
Which cost is relevant for short-run production decisions?
Variable cost
ExplanationCosts that can be adjusted in the short term.