InterviewSolution
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InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
The curve in the following diagram is the most similar to a typical , A. Total Variable Cost CurveB. Marginal Cost CurveC. Total Cost CurveD. Average Variable Cost Curve |
| Answer» Correct Answer - C | |
| 2. |
Which two curves are intersected by MC curve at their minimum points:A. AC and AVCB. AVC and AFCC. AC and AFCD. AC and TVC |
| Answer» Correct Answer - A | |
| 3. |
When AC curve slopes downwards, what will be the position of MC curve ? |
| Answer» MC curve will be below the AC curve. | |
| 4. |
MC curve intersects AC curve at its `"______"` point and AVC curve at its `"_____"` point.A. Maximum, MinimumB. Minimum, MinimumC. Minimum, MaximumD. None of these |
| Answer» Correct Answer - B | |
| 5. |
Identify the following curve : A. Average Variable Cost CurveB. Total Variable Cost CurveC. Average Fixed Cost CurveD. Average Cost Curve |
| Answer» Correct Answer - C | |
| 6. |
Which of the following diagram correctly depicts the relationship between `TC, TFC` and TVC ?A. B. C. D. |
| Answer» Correct Answer - C | |
| 7. |
The area under the following curve is equal to : A. Total CostB. Average CostC. Average Variable CostD. Total Variable Cost |
| Answer» Correct Answer - D | |
| 8. |
When `AC gt MC`, then MC can:A. FallB. RiseC. Both (a) and (b)D. None of these |
| Answer» Correct Answer - C | |
| 9. |
Which formula is incorrect to determine the value of TC :A. `TC = TVC + TFC`B. `TC = sumMC`C. `TC = AC xx "Output"`D. `TC = sumMC + TFC` |
| Answer» Correct Answer - B | |
| 10. |
Discuss the relationship between TVC and MC. OR Draw a diagram showing TVC in terms of the area under MC curve. |
| Answer» we know, MC is addition to TVC when one more unit of output is produced. So, TVC can be obtained as addition of all or sumation of MC’s of all the units produced. If output is assumed to be perfectly divisible, then total area under the MC curve will be equal to TVC. | |
| 11. |
The average fixed cost at 4 units of output is `₹ 20`. Average variable cost at 5 units of output is `₹ 40`. Average cost of producing 5 units is : (Choose the correct alternative)A. `₹ 20`B. `₹ 40`C. `₹ 56`D. `₹ 60` |
| Answer» Correct Answer - C | |
| 12. |
Why does the vertical distance between AC curve and AVC curve gradually decline ? |
| Answer» The vertical distance between AC and AVC ( costs such as wages or cost of supplies) curves continues to fall with increase in output because the gap between them is AFC, which continues to decline with rise in output.Due to the Law of Variable Proportions both AC and AVC curves are U- shaped. | |
| 13. |
A firm is has variable cost `₹ 1,000` at five units of output. If fixed costs are `₹ 400`, what will be the average total cost at five units of output ?A. `₹ 280`B. `₹ 80`C. `₹ 200`D. `₹ 1400` |
| Answer» Correct Answer - A | |
| 14. |
Which of the following is true with respect to relationship between AC and MC?A. When `MC gt AC`, AC fallsB. AC curve intesects MC curve at minimum MCC. MC curve intersects AC curve at minimum ACD. When MC lt AC, ATC` rises |
| Answer» Correct Answer - C | |
| 15. |
Which is the following is a variable cost for a firm ?A. Intersect on loanB. Monthly rentC. Insurance premiumD. Wages to employes |
| Answer» Correct Answer - D | |
| 16. |
when change in total cost is divided by change in output, we get :A. Average costB. Total variable costC. Marginal costD. Average variable cost |
| Answer» Correct Answer - C | |
| 17. |
As output arises:A. AVC curve and AC curve move away from each otherB. AVC curve and AC curve come closer and closer to each otherC. AVC curve and AC curve meet afte sometimeD. AVC curve and AC curve come closer and closer to each other, but do not meet |
| Answer» Correct Answer - D | |
| 18. |
Which condition is incorrect :A. AC can rise when MC is fallingB. AC can fall when MC is risingC. AVC can fall when MC is risingD. AC can rise when MC is rising |
| Answer» Correct Answer - A | |
| 19. |
A firm producing 6 units of output has average total cost `₹ 150` and has to pay `₹ 240` to its fixed factors of production. In the given case, average variable cost at 6 units of output will be :A. `₹ 150`B. `₹ 900`C. `₹ 110`D. `₹ 1,440` |
| Answer» Correct Answer - C | |
| 20. |
Which one of the following is also known as fixed cost ?A. Supplementary CostB. Primary CostC. Direct CostD. Avoidable Cost |
| Answer» Correct Answer - A | |
| 21. |
AVC can fall even when MC is rising, provided :A. `MC lt AVC`B. `MC gt AVC`C. `MC = AVC`D. None of these |
| Answer» Correct Answer - A | |
| 22. |
When AC is rising MC is :A. Equal to ACB. More than ACC. Less than ACD. Constant |
| Answer» Correct Answer - B | |
| 23. |
Identify the correct mathematical expression.A. `TC = TFC - TVC`B. `TVC = TFC - TC`C. `TFC = TC - TVC`D. `TC = TVC - TFC` |
| Answer» Correct Answer - C | |
| 24. |
Which of the following cost curves is rectangular hyperbola ?A. Average cost curveB. Marginal cost curveC. Average variable cost curveD. Average fixed cost curve |
| Answer» Correct Answer - D | |
| 25. |
Minimum point of AC occurs to the right of minimum point of :A. TCB. TVCC. AFCD. AVC |
| Answer» Correct Answer - D | |
| 26. |
Which cost increases continuously with increase in production ?A. Average costB. Marginal costC. Variable costD. Fixed cost |
| Answer» Correct Answer - C | |
| 27. |
AC is obtained by dividing TC by the level of :A. Labour employedB. Output producedC. Units consumedD. Output sold |
| Answer» Correct Answer - B | |
| 28. |
"Salary of Permanent staff" is which type of cost ?A. Variable and implicit CostB. Fixed and implicit CostC. Fixed and Explicit CostD. Variable and Explicit Cost |
| Answer» Correct Answer - C | |
| 29. |
In the short run, total cost curve starts from:A. OriginB. Positive vertical interceptC. Positive horizontal interceptD. None of these |
| Answer» Correct Answer - B | |
| 30. |
`"_____"` cost refers to actual payment made by the entreneur to the providers of factor services.A. ExplicitB. ImplicitC. VariableD. Fixed |
| Answer» Correct Answer - A | |
| 31. |
Total cost can never be constant. |
| Answer» True. Total Cost can be constant only when Marginal Cost is zero, which is not possible. Marginal cost is the cost added by producing one additional unit of a product or service. | |
| 32. |
Classify the following as fixed cost and variable cost : (i) Salary to manager of the company. (ii) Wages to casual labour. (iii) Payment of insurance premium for insurance of factory. (iv) Payment for raw material. (v) Payment of rent of Postpaid connection of Mobile Phone. (vi) Interest on lone taken from ICICl. (vii) Electicity charges beyond the minimum rent. (viii) Payment of rent of the factory builing to the landlord. (ix) Commission to production manager on the basis of number of units produced. (x) Payment of fuel used in machines. |
| Answer» Fixed Cost : (i), (iii), (v), (vi), (vii) , Variable Cost : (ii), (iv), (vii), (ix),(x) | |
| 33. |
The two inversely S-shaped short run cost curve are parallel to each other and maintain a constant distance of `₹ 50`. What cost is indicated by `₹ 50` ? Also , Identify the two inversely S-shaped short run cost curves. |
| Answer» `₹ 50` inidicates total fixed cost. The two inversely S-shaped short run cost curves are : Total Cost Curve, and (ii) Total Variable Cost curve. | |
| 34. |
Total cost of production is the sum total of variable cost and marginal cost. |
| Answer» False. Total cost is the sum total of variable cost and fixed cost. TC= TVC+TFC | |
| 35. |
Marginal cost is not affected by total fixed cost. |
| Answer» True. As total fixed cost does not change with change in output, marginal cost is independent of total fixed cost and is affected only by change in total variable cost. | |
| 36. |
Average variable cost curve is a U-shaped curve. |
| Answer» True. Average variable cost is a U-shaped curve as it initially falls, then remains constant for a while and finally starts increasing. It happens due to three phases of Law of Variable Proportion.. | |
| 37. |
Costs that have been already incurred are important factors in making production decisions. |
| Answer» False. Costs that are still to be incurred are important factors in making production decisions. | |
| 38. |
If a resource can be put only to particular use, then opportunity cost is :A. Applicable and quantifiableB. Applicable but not quantifiableC. Not applicable at allD. None of these |
| Answer» Correct Answer - C | |
| 39. |
With increase in level to output, average fixed cost goes on failling till reaches zero. |
| Answer» False. `AFC = (TFC)/("Output"). TFC ` is constant and positive. So, with an increase in output AFC will fall but can never be zero. | |
| 40. |
Write your comment of the statement in a sentence or two:Greater production always means greater revenue. |
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Answer» No. Greater production does not always mean greater revenue (TR). Price (AR) may fall so much that higher output yields lower TR. |
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| 41. |
Write your comment of the statement in a sentence or two:AR is always greater than MR under monopoly. |
|
Answer» Yes. AR>MR under monopoly because AR tends to fall, and falling AR implies falling MR at a higher rate. |
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| 42. |
Complete the following sentence:Under perfect competition, both AR and MR are indicated by the same horizontal straight line, because _________ |
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Answer» Under perfect competition, both AR and MR are indicated by the same horizontal straight line, because AR is constant. |
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| 43. |
What is the Opportunity cost? |
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Answer» Opportunity cost is the cost of the next best alternative foregone. |
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| 44. |
What is Cost? |
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Answer» Cost is the sum total of explicit and implicit cost. Cost in economics includes actual expenditure on inputs (i.e. explicit cost) and the computed value of the inputs supplied by the owners (i.e. implicit cost). |
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| 45. |
Write your comment of the statement in a sentence or two:Long period TC curve starts from the origin. |
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Answer» Yes. Long period total cost (TC) curve starts from the origin (or zero) because in the long period, all costs are variable costs and variable costs always vary with output, so that when output is zero, variable costs are also zero. |
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| 46. |
Write your comment of the statement in a sentence or two:Short period TC curve starts from Y-axis. |
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Answer» Yes. TC = TFC + TVC and TFC remains constant even at zero level of output. At zero level of output, ∴ TVC = 0 Accordingly, TC curve starts from the Y-axis in the short period. |
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| 47. |
Define average variable cost (AFC) ? Discuss the shape of AFC curve with the help of a schedule and a diagram. |
| Answer» In economics, average fixed cost (AFC) is the fixed costs of production (FC) divided by the quantity (Q) of output produced. | |
| 48. |
Total fixed remains same even if output is zero. |
| Answer» True. Total fixed cost is incurred on fixed factors. The payment to such factors remains fixed even if output is zero. | |
| 49. |
MC is minimum at point where TC start increasing at an increasing rate. |
| Answer» False. MC is minimum when the rate of increase in TC stops diminishing. | |
| 50. |
Define the term Total cost, average cost and marginal cost. |
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Answer» Total cost refers to all expenses incurred by the producer to produce a given quantity of output. Average cost is the cost per unit of output produced. Marginal cost is the change in total cost by producing one more or less unit of output. |
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