Chapter 4: Cost and Revenue Analysis — Online MCQ Test
ECONOMICS · CLASS 11th · Tamil Nadu State Board
Practice Chapter 4: Cost and Revenue Analysis with a free chapter-wise online MCQ test.
This chapter covers: Focusing on economic cost concepts this chapter details short-run and long-run cost curves fixed variable total average and marginal costs. Students study revenue curves under diff....
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Chapter 4: Cost and Revenue Analysis — Important Questions & Answers
Which cost remains constant regardless of the level of output?
- A. Total Variable Cost
- B. Total Fixed Cost
- C. Marginal Cost
- D. Total Cost
Answer: B. Total Fixed Cost
Fixed costs are costs that do not change with the level of output, such as rent or salaries of permanent staff.
Fixed costs are costs that do not change with the level of output, such as rent or salaries of permanent staff.
The cost incurred on factors of production that vary directly with output is called:
- A. Explicit cost
- B. Implicit cost
- C. Variable cost
- D. Fixed cost
Answer: C. Variable cost
Variable costs change in direct proportion to the level of production, such as raw materials and power.
Variable costs change in direct proportion to the level of production, such as raw materials and power.
If Average Total Cost is decreasing, then Marginal Cost must be:
- A. Equal to Average Total Cost
- B. Greater than Average Total Cost
- C. Less than Average Total Cost
- D. Increasing
Answer: C. Less than Average Total Cost
When MC is below the ATC, it pulls the average down, causing ATC to decrease.
When MC is below the ATC, it pulls the average down, causing ATC to decrease.
A firm's Marginal Revenue (MR) curve in a perfect competition market is:
- A. Downward sloping
- B. Upward sloping
- C. A horizontal line parallel to the X-axis
- D. Vertical
Answer: C. A horizontal line parallel to the X-axis
Under perfect competition, the firm is a price taker, so the price remains constant, making MR constant and equal to Price.
Under perfect competition, the firm is a price taker, so the price remains constant, making MR constant and equal to Price.
Why does the Average Variable Cost (AVC) curve eventually slope upwards?
- A. Because of increasing returns to scale
- B. Because of the operation of the law of diminishing returns
- C. Because of fixed costs spreading
- D. Because price of inputs decreases
Answer: B. Because of the operation of the law of diminishing returns
As more variable factors are added, diminishing marginal returns set in, causing marginal and variable costs to rise.
As more variable factors are added, diminishing marginal returns set in, causing marginal and variable costs to rise.