CBSE Class 12 Economics Cost and Revenue MCQs

Question. Suppose the total cost of production of a commodity X is 1,25,000 out of which implicit cost 35,000 and normal profit is 25,000. What would be the explicit cost of commodity?
(a) 90, 000
(b) 65, 000
(c) 1,00,000
(d) 60, 000
Answer: B

Question. Variable Costs are —
(a) Period—related
(b) Product—related
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Cost must be paid even if the Firm's level output is zero.
(a) Variable
(b) Direct
(c) Incremental
(d) Fixed
Answer: D

Question. Marginal Cost is independent of Variable Cost. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) Nothing can be said
Answer: B

Question. .......... Cost will be incurred even when the Firm's produces Nil output.
(a) Variable
(b) Fixed
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Variable Costs are a function of —*
(a) Output
(b) Time
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Which of the following is not a Fixed Cost?
(a) Payment of Interest on Borrowed Capital
(b) Charges for Fuel and Electricity
(c) Depreciation Charges on Equipment and Buildings
(d) Contractual Rent for Equipment of Building
Answer: B

Question............... Costs are important in short term decision making of the Firm, to determine the output at which profits can be maximized.
(a) Fixed
(b) Sunk
(c) Opportunity
(d) Marginal
Answer: D

Question. ............ is the addition made to the total cost by production of an additional unit of output.
(a) Fixed Cost
(b) Variable Costs
(c) Total Costs
(d) Marginal Costs
Answer: D

Question. Which of the following statement is true?
(a) Marginal Cost is a sub—set of Incremental Cost
(b) Incremental Cost is sub—set of Marginal Cost
(c) Marginal Cost is a sub—set of Sunk Cost
(d) Sunk Cost is a sub—set of
Answer: A

Question. Which of the following is true regarding Economic Cost and Accounting Cost?
(a) Economic Cost = Accounting Cost
(b) Economic Cost > Accounting Cost
(c) Economic Cost < Accounting Cost
(d) None of the above
Answer: B

Question...... Cost must be incurred only when the Firm's produces output.
(a) Variable
(b) Fixed
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Outlay Costs—
(a) Involve cash payment
(b) Do not involve any cash payment
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. If the following which one corresponds to Fixed Cost?
(a) Payments for Raw Material
(b) Labour Costs
(c) Transportation Charges
(d) Insurance Premium on Property
Answer: D

Question. All Variable Costs are avoidable or discretionary in nature. This statement is —
(a) True
(b) False
(c) Partially True
(d) Nothing can be said
Answer: A

Question. As output increases, Total Variable Cost —
(a) Decreases
(b) Increases
(c) Remains constant
(d) Becomes zero
Answer: B

Question. Which Cost increases continuously with the increase in production?
(a) Average Cost
(b) Marginal Cost
(c) Fixed Cost
(d) Variable Cost
Answer: D

Question. Variable Cost includes the Cost of —
(a) Buying Land and Building
(b) Hire Charges paid for the Machinery
(c) Salary to Manager
(d) Material Bought
Answer: D

Question. Opportunity Cost refers to —
(a) Cost of opportunity foregone
(b) Comparison between the policy that was chosen and the policy that was rejected
(c) Costs relating to sacrificed alternatives
(d) All of the above
Answer: D

Question. Suppose you find 100. If you choose to use 100 to go to a football match, your opportunity cost of going to the game is
(a) nothing, because you found the money.
(b) Only The value of your time spent at the game + The Expected Normal Interest / Return on 100.
(c) 100 (because you could have used the 100 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game.
(d) 100 (because you could have used the 100 to buy other things).
Answer: B

Question. Which of the following is an example of Variable Cost in the short run?
(a) Cost of Equipment
(b) Interest Payment on past borrowings
(c) Payment of Rent on Building
(d) Cost of Raw Materials
Answer: D

Question. The difference between Economic Cost and Accounting Cost is equal to —
(a) Explicit Cost
(b) Implicit Cost
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Incremental Cost equals —
(a) Additional Variable Costs only
(b) Additional Fixed Costs only
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. The following are some Costs incurred by a Clothing Manufacturer. State which among them will be considered as Fixed Cost.
(a) Cost of Cloth
(b) Piece Wages paid to Workers
(c) Depreciation on Machines owing to time
(d) Cost of Electricity for running machines
Answer: C

Question. are costs that do not vary with output, upto a certain level of activity.
(a) Variable
(b) Fixed
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Marginal Cost can be defined as —
(a) Change in Average Variable Cost divided by Change in Total Output
(b) Change in Average Fixed Cost divided by Change in Total Output
(c) Change in Total Fixed Cost divided by Change in Total Output
(d) Change in Total Cost due to Change in Total Output by one additional unit.
Answer: D

Question. Marginal Cost is independent of Fixed Cost. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) Nothing can be said
Answer: A

Question. Which of the following will not affect Marginal Costs?
(a) Variable Costs
(b) Output Quantity
(c) Fixed Costs
(d) All of the above
Answer: C

Question. TCn TCn_i = which cost function?
(a) Marginal Cost
(b) Average Cost
(c) Total Cost
(d) None of the above
Answer: A

Question. Marginal Cost Curve of a Firm will show ........... behaviour when compared to Marginal Product (MP) Curve.
(a) Same
(b) Reverse
(c) Either (a) or (b)
(d) Nothing can be said
Answer: B

Question. Cost incurred in purchasing the Factor of Production is known as —
(a) Accounting Cost
(b) Economic Cost
(c) Marginal Cost
(d) Implicit Cost
Answer: A

Question. In a Cost Function, the Scale of Operations is a/an-
(a) Dependent Variable
(b) Independent Variable
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: B

Question. Implicit Costs are also known as —
(a) Notional Costs
(b) Opportunity Costs
(c) Imputed Costs
(d) All of the above
Answer: D

Question. Marginal Costs are applicable in —
(a) Short—Run
(b) Long—Run
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Read the following paragraph and answer the following four questions.
Nicole owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for 100 each. It costs Nicole 20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested 100,000 in her factory and equipment: 50,000 from her savings and 50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 per cent, too.) Nicole can work at a competing pottery factory for 40,000 per year.

Question. The accounting profit at Nicole's pottery
(a) 30000 factory is:
(b) 50000
(c) 80000
(d) 75000
Answer: D

Question. The economic profit at Nicole's factory is:
(a) fi 75000
(b) 35000
(c) fi 80000
(d) 30000
Answer: D

Question. The economic cost at Nicole's factory is:
(a) 75000
(b) 70000
(c) 80000
(d) 730000
Answer: B 

Question. The accounting cost at Nicole's pottery factory is
(a) 2500
(b) 5000
(c) 8000
(d) 75000
Answer: A

Question. can be defined as the Cost that involve actual payment to other parties.
(a) Implicit Costs
(b) Explicit Costs
(c) Hidden Costs
(d) Opportunity Costs
Answer: B

Question. If own people (e.g. family members) are employed in the Firm, without paying them any reward for their work, Labour Cost is an —
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: A

Question. In a Cost Function, the Output Quantity is a/an-
(a) Dependent Variable
(b) Independent Variable
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: B

Question. Which of the following is an example of an 'Explicit Cost"?
(a) Wages a Proprietor could have made by working as an employee of a large Firm
(b) Income that could have been earned in alternative uses by the resources owned by the Firm
(c) Payment of Wages by the Firm
(d) Normal Profit earned by a Firm
Answer: C

Question. Explicit Costs are also known as —
(a) Out—of—Pocket Costs
(b) Outlay Costs
(c) Accounting Costs
(d) All of the above
Answer: D

Question. Cost Analysis is the study of behaviour of_______in relation to one or more production criteria.
(a) Prices and Revenue
(b) Profits
(c) Costs
(d) Output Quantity
Answer: C

Question. Cost Analysis is the study of behaviour of Cost, in relation to —
(a) Selling Prices
(b) Profits
(c) Total Revenue
(d) One or more Production Criteria
Answer: D

Question. Explicit Costs are used for purposes.
(a) Accounting and Reporting
(b) Cost Control
(c) Decision Making
(d) All of the above
Answer: D

Question. If Entrepreneur employs his own funds as Capital, then Interest is —
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: A

Question. An Implicit Cost can be defined as the—
(a) Payment to the non—owners of the Firm for the resources they supply
(b) Money payment which the self— employed resources could have earned in their best alternative employment
(c) Costs which the Firm incurs but does not disclose
(d) Costs which do not change over a period of time
Answer: B

Question. As output increases, Total Fixed Cost —
(a) Decreases
(b) Increases
(c) Remains constant
(d) Becomes zero
Answer: C

Question. An entrepreneur who manages his Firm has to forego his salary, which he could have earned if he had worked elsewhere. The foregone Cost is known as —
(a) Implicit Costs
(b) Explicit Costs
(c) Hidden Costs
(d) Actual Costs
Answer: A

Question. Which of the following is an example of an "Implicit Cost"?
(a) Interest that could have been earned on retained earnings used by the Firm to finance expansion
(b) Payment of Rent by the Firm for the building in which it is housed
(c) Interest Payment made by the Firm for funds borrowed from a Bank
(d) Payment of Wages by the Firm
Answer: A

Question. In a Cost Function, the Total Cost or Cost per unit is a/an —
(a) Dependent Variable
(b) Independent Variable
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: A

Question. Salary / Wages paid to Employees / Workers is an —
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: B

Question. Which of the following does not relate to Implicit Costs?
(a) Notional Costs
(b) Out—of—Pocket Costs
(c) Imputed Costs
(d) Opportunity Costs
Answer: B

Question. Implicit Costs includes —
(a) Interest on own Capital invested by Entrepreneur
(b) Rent of Entrepreneur's own premises used in business
(c) Salary to Entrepreneur he would have earned in an alternative employment
(d) All of the above
Answer: D

Question. Which of the following are considered as Economic Cost?
(a) Normal Return on money Capital invested
(b) Wages or Salary of the Entrepreneur
(c) Interest on the Capital invested
(d) All of the above
Answer: D

Question. Accounting Process recognizes —
(a) Direct Costs
(b) Indirect Costs
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. When Total Revenue equals Economic Costs, it means that the Firm —
(a) Has No—Profit—No—Loss
(b) Earns Normal Profits
(c) Earns more than Normal Profits (i.e. Super—Normal Profits)
(d) Incurs Losses in the accounting sense
Answer: B

Question. In a Cost Function, the Price of Factors of Production is a/an-
(a) Dependent Variable
(b) Independent Variable
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: B

Question. Fixed Cost can be defined as —
(a) Which does not change with output
(b) Which changes with Sales
(c) Which changes proportionately with output
(d) All of the above
Answer: A

Question. Which of the following is an Implicit Cost?
(a) Wages paid to Workers / Labourers
(b) Rent for Land and Building used in business
(c) Normal Rate of Profit in the business
(d) All of the above
Answer: C

Question. Which of the following is an Implicit Cost?
(a) Land owned by Entrepreneur and used for business purposes, on which no Rent is paid.
(b) Wages or Salary not paid to the Entrepreneur, but could have been earned if his services had been sold somewhere else, i.e. if he were employed in another Firm.
(c) Normal Return on Money Capital invested by Entrepreneur himself in his own business.
(d) All of the above
Answer: D

Question. ..... are the value of foregone opportunities that do not involve any physical cash payment.
(a) Implicit Costs
(b) Explicit Costs
(c) Hidden Costs
(d) Actual Costs
Answer: A

Question. Costs which involve payment made by the Entrepreneur to providers of other factors of production are called —
(a) Explicit Cost
(b) Implicit Cost
(c) Variable Cost
(d) Fixed Cost
Answer: A

Question. Which theory proposes that a country could be better off by producing the product in which it has relatively lower Labour Cost and relatively higher Labour productivity?
(a) Absolute Advantage Theory
(b) Relative Advantage Theory
(c) Comparative Advantage Theory
(d) Imitation Theory
Answer: C

Question. Cost Function refers to the mathematical relationship between cost of a product and the various determinants of Cost. This statement is
(a) True
(b) Fal se
(c) Partially True
(d) None of the above
Answer: A

Question. Socia I Cost =
(a) Explicit Cost + Implicit Cost
(b) Private Cost + External Cost
(c) Private Cost + Internal Cost
(d) None of the above 
Answer: B

Question. If Rent is paid to the Landlord separately, it is an
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: B

Question. Opportunity Cost refers to ... in accepting an alternative course of action.
(a) Value of sacrifice made
(b) Benefit of opportunity foregone
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. Economic Cost includes—
(a) Accounting Cost + Explicit Cost
(b) Accounting Cost + Implicit Cost
(c) Fixed Cost + Variable Cost
(d) Accounting Cost + Non—Accounting Cost
Answer: B

Question. If Land is owned by the Entrepreneur, Rent is an
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: A

Question. Which of the following Costs is included and recorded in the books of accounts?
(a) Imputed Costs
(b) Opportunity Costs
(c) Notional Costs
(d) Explicit Costs
Answer: D

Question. Cost of Production incurred by an Individual firm is —
(a) Private Cost
(b) Social Cost
(c) Production Cost
(d) None of the above
Answer: A

Question. The Cost that a Firm incurs in hiring or purchasing any Factor of Production is referred to as —
(a) Explicit Cost
(b) Implicit Cost
(c) Variable Cost
(d) Fixed Cost
Answer: A

Question. Which of the following Costs is not included in the books of accounts?
(a) Explicit Costs
(b) Manufacturing Costs
(c) Taxes
(d) Implicit Costs
Answer: D

Question. involve subjective estimation.
(a) Implicit Costs
(b) Outlay Costs
(c) Out—of—Pocket Costs
(d) Accounting Costs
Answer: A

Question. Fixed cost Costs are a function of —
(a) Output
(b) Time
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. Which of the following is correct?
(a) Firms that earn Accounting Profits are economically profitable.
(b) Opportunity Cost plus Accounting Cost equals Economic Cost.
(c) When a Firm's Demand Curve slopes down, Marginal Revenue will rise as output rises.
(d) Firms increase profits by selling more output than their rivals.
Answer: B

Question. Implicit Costs are used for purposes.
(a) Accounting and Reporting
(b) Cost Control
(c) Decision Making
(d) All of the above
Answer: C

Question. Economic Profits are —
(a) Difference between Total Revenue, and Total Implicit and Explicit Costs
(b) Difference between Total Revenue and Total Economic Costs
(c) Zero in a perfectly competitive industry in the long—run
(d) All the above
Answer: D

Question. are not readily identified nor visibly traceable to specific goods, services, operations, etc.
(a) Direct Costs
(b) Indirect Costs
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: B

Question. If a resource can be put only to a particular use, then, Opportunity Costs —
(a) Are applicable and quantifiable
(b) Are applicable but not quantifiable
(c) Are not applicable at all
(d) None of the above
Answer: C

Question. Marginal Cost Curve of a Firm will be —
(a) L Shaped
(b) 3 Shaped
(c) U Shaped
(d) Inverted U Shaped
Answer: B

Question. If there are Implicit Costs of Production —
(a) Economic Profit will be equal to Accounting Profit.
(b) Economic Profit will be less than Accounting Profit.
(c) Economic Profits will be zero.
(d) Economic Profit will be more than Accounting Profit.
Answer: B

Question. Which of the following is an example of an Accounting Cost?
(a) Interest paid to Bank on short—term loan taken
(b) Cost incurred on the purchase of raw materials
(c) Wages paid to Labourers
(d) All the above
Answer: D

Question. The cost incurred during the acquisition of an asset
(a) Sunk Cost
(b) Replacement cost
(c) Historical cost
(d) None of the above
Answer: C

Question. Which of the following statements is false?
(a) Economic Costs include the Opportunity Costs of the resources owned by the Firm
(b) Accounting Costs include only Explicit Costs
(c) Economic Profit will always be less than Accounting Profit if resources owned and used by the Firm have any Opportunity Costs
(d) Accounting Profit is equal to Total Revenue less Implicit Costs
Answer: C

Question. Reward for Entrepreneurial Ability (i.e. Normal Profit in the business) is included in —
(a) Economic Cost
(b) Accounting Cost
(c) Explicit Cost
(d) Undisclosed Cost
Answer: A

Question. Opportunity Costs are used for purposes
(a) Accounting and Reporting
(b) Cost Control
(c) Decision Making
(d) All of the above
Answer: C

Question. Which of the following is not true with reference to Opportunity Cost?
(a) It is the value of the next best use for an economic good
(b) It is the value of a sacrificed alternative
(c) It is useful in decision—making
(d) It does not take into consideration, the cost of time
Answer: D

Question. Which of the following is/are true?
(a) Total Cost includes only Variable Costs
(b) Opportunity Cost is the value of the good of service forgone
(c) Economic Costs include only Out— of—Pocket Costs
(d) Both (a) and (c) above
Answer: B

Question. A Manager needs a Stenographer and a Clerk for the Accounts Department. But, due to financial constraints, he can able to recruit only one i.e. either Stenographer or Clerk. Finally he decides to recruit the Stenographer and had to give up the idea of having an Additional Clerk in the Accounts Department. Here, the Cost of not hiring an accounts clerk is known as —
(a) Accounting Cost
(b) Cost Possibility Curve
(c) Opportunity Cost
(d) Substitution Effect
Answer: C

Question. Cost is the Total Additional Cost that a Firm has to incur, as a result of implementing a major managerial decision.
(a) Sunk
(b) Incremental
(c) Opportunity
(d) Marginal
Answer: B

Question. Marginal Cost changes due to change in Cost
(a) Variable
(b) Fixed
(c) Total
(d) Average
Answer: A

Question. Marginal Costs per unit =
(a) Change in Total Costs ÷ Change in Output Quantity
(b) Change in Variable Costs ÷ Change in Output Quantity
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: C

Question. Direct costs are __
(a) Traceable costs
(b) Indirect costs
(c) Implicit costs
(d) Explicit costs
Answer: A

Question. When Total Revenue exceeds Economic Costs it means that the Firm —
(a) Has No—Profit—No—Loss
(b) Earns Normal Profits
(c) Earns more than Normal Profits (i.e. Super—Normal Profits)
(d) Incurs Losses
Answer: C

Question. Which of the following describes the behaviour of Marginal Cost Curve?
(a) Declines first, reaches its minimum and then rises
(b) Rises first, reaches a maximum and then declines
(c) Remains constant throughout all output levels
(d) Nothing can be said
Answer: A

Question. Fixed Costs are —
(a) Period—related
(b) Product—related
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Which of the following will affect Marginal Costs?
(a) Variable Costs
(b) Output Quantity
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. If a Firm produces zero output in the short period —
(a) Its Total Cost will be zero
(b) Its Variable Cost will be positive
(c) Its Fixed Cost will be positive
(d) Its Average Cost will be zero -
Answer: C

Question. Which Cost increases continuously with the increase in production?
(a) Average Cost
(b) Marginal Cost
(c) Fixed Cost
(d) Variable Cost
Answer: D

Question. Total Variable Costs always vary proportionately with output. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) Nothing can be said
Answer: B

Question. Over certain ranges of production Variable Costs vary less or more than proportionately depending on the utilisation of fixed facilities and resources during the production process. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) Nothing can be said
Answer: A

Question. Opportunity Cost is —
(a) Recorded in books of accounts
(b) Not recorded in books of accounts
(c) Sometimes (a) sometimes (b)
(d) Neither (a) nor (b)
Answer: B

Question. Which of the following statement best describes Sunk Costs?
(a) Costs which are incurred in the past
(b) Cost incurred by the Firm as result of bankruptcy of one of its Creditors
(c) Cost incurred by the Firm as a result of the fire that broke into one of the Firm's Godown.
(d) Setting off the losses that the Firm incurred in the previous years
Answer: A

Question. Some portion of Fixed Costs need not be incurred when operations are suspended.
These are called —
(a) Avoidable Fixed Costs
(b) Committed Fixed Costs
(c) Variable Costs
(d) Semi—Variable Costs
Answer: A

Question. Some portion of Fixed Costs cannot be avoided even when operations are suspended. These are called —
(a) Discretionary Fixed Costs
(b) Committed Fixed Costs
(c) Variable Costs
(d) Semi—Variable Costs
Answer: B

Question. Opportunity Costs —
(a) Involve cash payment
(b) Do not involve any cash payment Both (a) and (b)
(c) Neither (a) nor (b)
Answer: B

Question. .........are costs that change, based on the level of output.
(a) Variable
(b) Fixed
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Reward for Entrepreneurial Ability (i.e. Normal Profit in the business) is included in —
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: A

Question. When Total Revenue is less than Economic Costs, it means that the Firm —
(a) Incurs Losses in the economic sense
(b) Earns Normal Profits
(c) Earns more than Normal Profits (i.e. Super—Normal Profits)
(d) Incurs Losses in the accounting sense
Answer: A

Question. Variable Costs are incurred only when production takes place. So, they are in the nature of —
(a) Discretionary Costs
(b) Committed Costs
(c) Fixed Costs
(d) Semi—Variable Costs
Answer: A

Question. Which of the following statement is correct?
(a) An increase in price will make Replacement Costs higher than Historical Cost.
(b) A decrease in price will make Replacement Costs higher than Historical Cost.
(c) An increase in price will make Replacement Costs lower than Historical Cost.
(d) None of the above
Answer: A

Question. includes all payments paid to Factors of Production and Opportunity Cost.
(a) Implicit Costs
(b) Explicit Costs
(c) Economic Costs
(d) Accounting Costs
Answer: C

Question. When Total Revenue is less than Accounting Costs, it means that the Firm —
(a) Has No—Profit—No—Loss
(b) Earns Normal Profits
(c) Earns more than Normal Profits (i.e. Super—Normal Profits)
(d) Incurs Losses
Answer: D

Question. When Total Revenue is less than Accounting Costs, it means that the Firm incurs Losses —
(a) In the accounting sense
(b) In the economic sense
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. When Entrepreneur himself manages the business, the reward for Entrepreneurial Ability (i.e. Profit) is an —
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: A

Question. Cost Analysis is concerned with ......... of production.
(a) Financial aspects
(b) Physical aspects
(c) Either (a) or (b)
(d) Both (a) and (b)
Answer: A

Question. Which of the following Costs does not include the contractual cash payments which the Firm makes to other Factor Owners for purchasing or hiring various factors?
(a) Private Costs
(b) Variable Costs
(c) Accounting Costs
(d) Implicit Costs
Answer: D

Question. Identify the Dependent Variable in a Cost Function from the following.
(a) Quantity of Output
(b) Scale of Operations
(c) Total Cost
(d) Price of Factors of Production
Answer: C

Question. Identify the Dependent Variable in a Cost Function from the following.
(a) Efficiency
(b) Level of Capacity utilisation
(c) Technology
(d) Cost per unit
Answer: D

Question. Identify the Independent Variable in a Cost Function from the following.
(a) Time Period under study
(b) Cost per unit
(c) Total Cost
(d) None of the above
Answer: A

Question. Cost Functions are Derived Functions.
They are derived from —
(a) Demand Function
(b) Supply Function
(c) Isoquant Function
(d) Production Function
Answer: D

Question. Which of the following statements regarding Short and Long Run Cost Functions is not true?
(a) A Variable Input varies according to the quantity of output to be produced
(b) In the Short Run, one or more of the inputs of the production process is fixed
(c) In the Long Run, all the inputs are fixed
(d) In the Long Run there are no restrictions on the resource allocation in the production process.
Answer: C

Question. Costs which do not involve any cash payment to outsiders are called —
(a) Explicit Cost
(b) Implicit Cost
(c) Variable Cost
(d) Fixed Cost
Answer: B

Question. Which of the following is true regarding Economic Cost and Accounting Cost?
(a) Economic Cost less Accounting Cost = Explicit Cost
(b) Economic Cost less Accounting Cost = Implicit Cost
(c) Accounting Cost less Economic Cost = Explicit Cost
(d) Accounting Cost less Economic Cost = Implicit Cost
Answer: B

Question. When Total Revenue equals Accounting Costs, it means that the Firm —
(a) Has No—Profit—No—Loss
(b) Earns Normal Profits
(c) Earns more than Normal Profits (i.e. Super—Normal Profits)
(d) Incurs Losses in the accounting sense
Answer: A

Question. A Cost Function determines the behaviour of Costs with change in —
(a) Output
(b) Input
(c) Technology
(d) Wages
Answer: A

Question. Accounting Cost equals —
(a) Explicit Cost
(b) Implicit Cost
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. The Cost Function indicates the functional relationship between Total Cost and —
(a) Total Input
(b) Fixed Cost
(c) Total Output
(d) Variable Cost
Answer: C

Question. Which of the following is not a determinant of the Firm's Cost Function?
(a) Production Function
(b) Price of Labour
(c) Rent paid for use of Building
(d) Price of the Firm's Output
Answer: D

Question. The Functional Relationship between Output and the Long Run Cost of Production is known as —
(a) Cost Function
(b) Long Run Cost Function
(c) Short Run Cost Function
(d) Output Function
Answer: B

Question. The Functional Relationship between Output and the Short Run Cost of Production is known as —
(a) Cost Function
(b) Long Run Cost Function
(c) Short Run Cost Function
(d) Output Function
Answer: C

Question. Which of the following statements regarding the Long Run Cost Function is not true?
(a) The Firm adjusts Factors of Production to meet the market demand
(b) Firms identify a combination that gives maximum output at the lowest Cost
(c) Inputs are chosen for producing a desired level of output
(d) All the inputs in the long—run are fixed
Answer: D

Question. Expansion of Scale of operation forms a part of ...... Cost Function.
(a) Long run
(b) Short run
(c) Fixed
(d) Both (b) and (c)
Answer: A

Question. Production Analysis is concerned with .......................... of production.
(a) Financial aspects
(b) Physical aspects
(c) Either (a) or (b)
(d) Both (a) and (b)
Answer: B

Question. Opportunity Costs are a result of —
(a) Technology obsolescence
(b) Overproduction
(c) Scarcity
(d) Abundance of resources
Answer: C

Question. Opportunity Costs arise only when resources are —
(a) Scarce
(b) Restricted in availability
(c) Available only to a limited extent
(d) All of the above
Answer: D

Question. are readily identified and are traceable to a particular product, service, operation or plant.
(a) Direct Costs
(b) Indirect Costs
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: A

Question. Expenditure incurred on Wages, Rent, Interest, etc. are included in—
(a) Accounting Cost
(b) Opportunity Cost
(c) Fixed Cost
(d) Direct Cost
Answer: A

Question. Economic Cost equals —
(a) Explicit Cost
(b) Implicit Cost
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer: C

Question. A Product can be produced using two input combinations A and B. Combination A takes 2 units of Labour and 8 units of Capital. Combination B takes 3 units of Labour and 5 units of Capital, what is the Marginal Rate of Technical Substitution of Labour for Capital?
(a) 0
(b) 2
(c) 3
(d) 5
Answer: C

Question. Economic Cost includes—
(a) Accounting Cost + Non— Accounting Cost
(b) Fixed Cost + Variable Cost
(c) Explicit Cost + Implicit Cost
(d) Short Run Cost + Long Run Cost
Answer: C

Question. For Cost Analysis purposes, the Production Criteria may be —
(a) Prices of factors of production
(b) Quantity of output
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: C

Question. If Capital is borrowed and used in the business, Interest on Capital is —
(a) Implicit Cost
(b) Explicit Cost
(c) Hidden Cost
(d) Undisclosed Cost
Answer: B

Question. The Cost of one thing in terms of the alternative given up is known as —
(a) Production Cost
(b) Physical Cost
(c) Real Cost
(d) Opportunity Cost
Answer: D

Question. Incremental Cost 100Cost is not relevant for Decision—Making
(a) Economic
(b) Opportunity
(c) Sunk
(d) Incremental Cost
Answer: C

Question. Opportunity Cost arises only when alternatives are available. This statement is —
(a) True
(b) Fal se
(c) Partially True
(d) None of the above
Answer: A

Question. Costs which are already incurred once and for all, and cannot be recovered.
(a) Historical cost
(b) Sunk Cost
(c) Private Cost
(d) None of the above
Answer: B

Question. A Cost Function deals with —
(a) Total Cost
(b) Cost per unit
(c) Either (a) or (b)
(d) Neither (a) nor (b)
Answer: C

Question. With which of the following is the concept of Marginal Cost closely related?
(a) Variable Cost
(b) Fixed Cost
(c) Opportunity Cost
(d) Economic Cost
Answer: A

Question. Additional cost incurred by a Firm as a result of a business decision —
(a) Sunk Cost
(b) Replacement Cost
(c) Incremental Cost
(d) Extra Cost
Answer: C

Question. For Cost Analysis purposes, the Production Criteria may be —
(a) Quantity of output
(b) Scale of operations
(c) Prices of factors of production
(d) All of the above
Answer: D

Question. Which of the following does not relate to Explicit Costs?
(a) Out—of—Pocket Costs
(b) Outlay Costs
(c) Opportunity Costs
(d) Accounting Costs
Answer: C

Question. are actually incurred and hence can be easily and objectively measured.
(a) Implicit Costs
(b) Explicit Costs
(c) Hidden Costs
(d) Opportunity Costs
Answer: B

Question. Economic Cost includes —
(a) Wages paid to Workers / Labourers
(b) Rent for Land and Building used in business
(c) Normal Rate of Profit in the business
(d) All of the above
Answer: D