General MCQs 25

1.Which statement is true?

a. ATC+AVC=AFC

b. ATC+MC=AFC

c. ATC+AFC=AVC

d. AFC+AVC=ATC

Ans:AFC+AVC=ATC


2.TVC:

a. starts from origin

b. does not start from origin

c. is parallel to y-axis

d. none of them

Ans:starts from origin


3.The short run

a. is less than one year

b. requires that at least one input is fixed

c. requires that all inputs are fixed

d. is just long enough to permit entry ad exit

Ans:Requires that at least one input is fixed


4.As output increases, AC curve:

a. falls

b. rises

c. remains constant

d. all of them

Ans:all of them


5.The shape of rectangular hyperbola is made by

a. MC

b. AFC

c. AVC

d. none of them

Ans:AFC


6.Which is not a cause of shift in cost curves of a firm

a. excise tax

b. prices of inputs

c. increase in productivity

d. price of a product

Ans: price of a product


7.TC :

a. raises continuously 

b. falls after reaching a maximum

c. is horizontal

d. none of them

Ans:Raises continuously 


8.The long run is a

a. period of three years or longer

b. period long enough to allow firms to change plant size and capacity

c. period long enough to allow firm to make economic decisions

d. a period which affects larger than smaller firms

Ans:period long enough to allow firms to change plant size and capacity


9.As output increases

a. MC curve firstly falls then rises

b. MC firstly rises then falls

c. MC continuously rises

d. none of them

Ans: MC curve firstly falls then rises


10.MC is given by

a. slope of TFC

b. slope of TC

c. slope of AC

d. none of them

Ans:slope of TC


11.All the following are U-shaped except

a. AVC

b. AFC

c. AC

d. MC

Ans:AFC


12.Unit cost is another name for

a. MC

b. AVC

c. ATC

d. AFC

ANS:ATC


13.The necessary condition for equilibrium position of a firm is

a. MC > MR

b. MC > price

c. MC = MR

d. MC = AC

Ans:MC = AC


14.At the point of equilibrium of firm (under perfect competition)

a. MC curve must be rising 

b. MC curve must be falling

c. MC curve must be rising

d. none of them

Ans: MC curve must be rising 


15.The basic goal of a firm is to

a. maximizing revenue

b. maximizing welfare of its employees

c. maximize profit

d. maximize output

Ans:maximize profit


16.Profit is maximum when

a. distance between TR and TC is maximum

b. distance between AR and AC is maximum

c. distance between MR and MC is maximum

d. none of them

Ans:distance between TR and TC is maximum


17.Normal profit is

a. part of total cost

b. part of economic profit

c. total revenue minus total cost

d. total revenue minus implicit cost

Ans:part of total cost


18.A firm's MR exceeds its MC maximum profit rule requires that firm to

a. increase in output in both perfect and imperfect competition

b. increase in perfect competition but not necessarily in imperfect competition

c. increase in output in imperfect but not necessarily in perfect competition

d. decrease in output in both perfect and imperfect competition

Ans:increase in output in both perfect and imperfect competition


19.Profit is maximum when

a. slope of MC and MR is the same

b. slope of TC and TR is the same

c. slope of AC and AR is the same

d. none of them

Ans: slope of TC and TR is the same


20.Economic profit is

a. part of total cost

b. total revenue minus total cost

c. total revenue minus explicit cost

d. total variable cost minus total fixed cost

Ans: total revenue minus total cost


21.The basic goal of firm is to

a. maximizing revenue

b. maximizing welfare of its employees

c. maximize profit

d. maximize output

Ans:maximize profit


22.Profit is maximum when

a. TC and TR curves are parallel

b. MC and MR curves are parallel

c. AC and AR curves are parallel 

d. none of them

Ans:TC and TR curves are parallel


23.A firm earns economic profit when total profit exceeds

a. normal profit

b. implicit costs

c. explicit costs

d. variable costs

Ans.Normal profit


24.The payments received by the owners of capital are called

a. pure rents

b. rent

c. quasi rents

d. interest

Ans:Interest


25.Which of the following statements about junk bonds is correct?

a. their default rate is approximately 30%

b. they pay more than investor could earn in stock market

c. they paid for the "merger-mania" of the 1980's

d. the higher return is due to higher risk

Ans:The Higher Return is due to higher risk