#1
Which of the following is an example of a fixed cost in production?
Rent for factory space
ExplanationFixed costs remain constant irrespective of production levels.
#2
What is the formula for calculating total cost in production?
Total Cost = Fixed Cost + Variable Cost
ExplanationTotal cost is the sum of fixed and variable costs.
#3
What is the concept of economies of scale in production?
A situation where average total cost decreases as production increases.
ExplanationAs production increases, average total cost decreases due to economies of scale.
#4
What is the concept of the law of diminishing returns in production?
As more units of a variable input are added, the marginal product eventually decreases.
ExplanationAdding more units of a variable input results in diminishing marginal returns.
#5
In the context of production and cost theory, what is the definition of 'marginal cost'?
The additional cost of producing one more unit of output.
ExplanationMarginal cost represents the increase in total cost from producing one additional unit of output.
#6
What is the law of diminishing marginal returns?
As more units of a variable input are added, the marginal product eventually decreases.
ExplanationAdding more units of a variable input results in decreasing marginal returns.
#7
In the long run, all inputs are considered to be:
Variable
ExplanationIn the long run, all inputs can be adjusted, making them variable.
#8
Which cost is incurred even when production is zero?
Fixed cost
ExplanationFixed costs are incurred regardless of the level of production.
#9
What does the short-run production function illustrate?
The impact of changes in variable inputs on output when some inputs are fixed.
ExplanationIt shows how output changes with variable inputs while some inputs remain fixed.
#10
What is the significance of the average variable cost curve in production analysis?
It represents the relationship between average variable cost and quantity produced.
ExplanationShows how average variable cost changes with the quantity produced.
#11
In the long run, what happens to fixed costs as production increases?
Fixed costs remain constant regardless of production levels.
ExplanationFixed costs do not change with changes in production levels in the long run.
#12
What is the formula for calculating average variable cost?
AVC = Total Variable Cost / Quantity
ExplanationAverage variable cost is the total variable cost divided by quantity produced.
#13
What is the relationship between marginal cost and average total cost at the point where average total cost is at its minimum?
Marginal cost equals average total cost.
ExplanationAt the minimum point of average total cost, marginal cost equals average total cost.
#14
What is the primary difference between economic profit and accounting profit?
Economic profit includes only implicit costs, while accounting profit includes both explicit and implicit costs.
ExplanationEconomic profit considers opportunity costs, while accounting profit includes all costs.
#15
What is the relationship between marginal product and average product in the production process?
When marginal product is greater than average product, average product is increasing.
ExplanationAverage product increases when marginal product is greater than average product.
#16
What is the concept of the production function in economics?
The set of all feasible combinations of inputs and outputs in production.
ExplanationDescribes the relationship between inputs and outputs in production.
#17
What is the relationship between total cost and total variable cost?
Total cost is the sum of total variable cost and fixed cost.
ExplanationTotal cost comprises both fixed and variable costs.