Production and Costs: Interactive Learning Quizzes for Economics Sixth Form

Question 1

Which of the following is NOT a factor of production as defined in economics?

Accepted Answer

Demand

Answer

Land

Answer

Labor

Answer

Capital

Question 2

Which of the following is a characteristic of a fixed cost?

Accepted Answer

It does not change with the level of output.

Answer

It increases with the level of output.

Answer

It decreases with the level of output.

Answer

It is equal to the total cost of production.

Question 3

The long-run average cost curve is typically:

Accepted Answer

U-shaped.

Answer

L-shaped.

Answer

Always decreasing.

Answer

Always increasing.

Question 4

Which of the following is an example of a sunk cost?

Accepted Answer

Research and development expenses

Answer

Advertising expenses

Answer

Raw material costs

Answer

Labor costs

Question 5

The elasticity of demand for a product measures:

Accepted Answer

The responsiveness of quantity demanded to changes in price.

Answer

The responsiveness of price to changes in quantity demanded.

Answer

The total change in quantity demanded divided by the total change in price.

Answer

The total change in price divided by the total change in quantity demanded.

Question 6

Government subsidies to producers can:

Accepted Answer

Increase the supply of a product.

Answer

Decrease the demand for a product.

Answer

Increase the equilibrium price.

Answer

Decrease the equilibrium quantity.

Question 7

Which of the following is **not** a fundamental factor of production?

Accepted Answer

Time

Answer

Land

Answer

Labor

Answer

Technology

Question 8

Which of the following is a type of **fixed cost** in the short run?

Accepted Answer

Rent on the factory building

Answer

Raw materials

Answer

Wages of production line workers

Answer

Electricity used in production

Question 9

The short-run production function shows the relationship between:

Accepted Answer

Output and one **variable** factor of production

Answer

Output and all factors of production

Answer

Cost and output

Answer

Profit and output

Question 10

Which of the following is **not** a determinant of the shape of the long-run average total cost curve?

Accepted Answer

Business strategy

Answer

Economies of scale

Answer

Diseconomies of scale

Answer

Factor prices

Question 11

The profit-maximising output level is where:

Accepted Answer

Marginal revenue equals marginal cost

Answer

Marginal revenue is greater than marginal cost

Answer

Marginal cost equals average total cost

Answer

Average total cost is minimised

Question 12

Revised: Which element is not among the primary factors of production?

Accepted Answer

Weather

Answer

Land

Answer

Labour

Answer

Capital

Question 13

Revised: Economies of scale refer to:

Accepted Answer

Decreasing costs as output increases

Answer

Increasing costs as output increases

Answer

Constant costs as output increases

Answer

No relationship between costs and output

Question 14

Revised: For a firm, the optimal level of output is achieved when:

Accepted Answer

Marginal revenue equals marginal cost

Answer

Average total cost is minimized

Answer

Total revenue is maximized

Answer

Fixed costs are lowest

Question 15

Revised: A firm experiences diseconomies of scale when:

Accepted Answer

Average total cost increases as output increases

Answer

Marginal cost exceeds average total cost

Answer

Fixed costs are high

Answer

Variable costs are low

Question 16

Revised: Which fundamental assumption underpins the law of diminishing returns?

Accepted Answer

All other inputs remain constant

Answer

The variable input is infinitely divisible

Answer

The fixed input is always land

Answer

The marginal product of the fixed input is constant

Question 17

What is the definition of economies of scale?

Accepted Answer

The cost per unit decreases as production increases.

Answer

The cost per unit increases as production increases.

Answer

The cost per unit stays the same as production increases.

Answer

The cost per unit changes randomly as production increases.

Question 18

Which of the following is NOT considered a factor of production?

Accepted Answer

Profit

Answer

Land

Answer

Labor

Answer

Capital

Question 19

The law of diminishing returns states that:

Accepted Answer

As more units of a variable input are added to a fixed input, the marginal product of the variable input will decrease.

Answer

As more units of a fixed input are added to a variable input, the marginal product of the fixed input will increase.

Answer

As more units of a variable input are added to a fixed input, the total product will increase at an increasing rate.

Answer

As more units of a fixed input are added to a variable input, the total product will decrease at a decreasing rate.

Question 20

Which of the following is an example of a fixed cost?

Accepted Answer

Rent

Answer

Raw materials

Answer

Wages of production line workers

Answer

Cost of goods sold

Question 21

Economies of scale occur when:

Accepted Answer

The long-run average cost of production decreases as output increases.

Answer

The long-run average cost of production increases as output increases.

Answer

The short-run average cost of production decreases as output increases.

Answer

The short-run average cost of production increases as output increases.

Question 22

As a firm increases its production output, which of the following costs are likely to increase?

Accepted Answer

Wages

Accepted Answer

Raw materials

Answer

Rent

Answer

Insurance

Question 23

Which of the following costs remains constant regardless of the level of output produced in the short run?

Accepted Answer

Rent

Answer

Wages

Answer

Raw materials

Answer

Utilities

Question 24

Which of the following economies of scale can result in higher average costs of production?

Accepted Answer

Diseconomies of scale

Answer

Specialization

Answer

Bulk purchasing

Answer

Learning curve effect

Question 25

Which of the following best describes the opportunity cost of attending university?

Accepted Answer

The income you could have earned if working

Answer

The tuition fees

Answer

The time spent studying

Answer

The social activities you miss out on

Question 26

Which of the following assumptions of the law of diminishing marginal returns is most critical?

Accepted Answer

All other inputs are fixed.

Answer

The marginal product is initially negative.

Answer

The production function is linear.

Answer

The variable input is non-divisible.

Question 27

Which of the following is NOT a factor that can affect the position of the production possibility frontier?

Accepted Answer

Changes in consumer tastes

Answer

Natural disasters

Answer

Technological progress

Answer

Government policies

Question 28

Which of the following potential benefits of specialization is most significant?

Accepted Answer

Increased efficiency

Answer

Enhanced innovation

Answer

Reduced costs

Answer

Greater consumer choice

Question 29

Which of the following is NOT considered a primary factor of production?

Accepted Answer

Entrepreneurship

Answer

Land

Answer

Labor

Answer

Capital

Question 30

The law of diminishing returns implies that:

Accepted Answer

As more of a variable input is used, its marginal product will eventually decrease.

Answer

As more of a fixed input is used, its marginal product will eventually increase.

Answer

As more of any input is used, the marginal product of all inputs will eventually decrease.

Answer

As more of a variable input is used, its marginal cost will eventually increase.

Question 31

Economies of scale exist when:

Accepted Answer

Average total cost falls as output increases.

Answer

Average total cost rises as output increases.

Answer

Marginal cost falls as output increases.

Answer

Fixed costs remain unchanged as output increases.

Question 32

The short-run production function demonstrates the relationship between:

Accepted Answer

Output and variable factors of production.

Answer

Output and all factors of production.

Answer

Output and fixed factors of production.

Answer

Fixed costs and variable costs.

Question 33

Select the advantage offered by economies of scale:

Accepted Answer

Lower production costs

Answer

Enhanced product quality

Answer

Increased market share

Answer

Improved customer service

Question 34

Diseconomies of scale arise when:

Accepted Answer

Average total cost increases as output increases.

Answer

Average total cost decreases as output increases.

Answer

Marginal cost decreases as output increases.

Answer

Fixed costs increase at a diminishing rate as output increases.

Question 35

Which of the following is NOT a potential cause of diseconomies of scale?

Accepted Answer

Increased specialization

Answer

Increased coordination challenges

Answer

Reduced marginal productivity

Answer

Overcrowding

Question 36

How does technological advancement impact an economy's production capabilities?

Accepted Answer

It expands the range of goods and services that can be produced.

Answer

It reduces the range of goods and services that can be produced.

Answer

It has no effect on the range of goods and services that can be produced.

Question 37

Which of the following is considered a fixed cost?

Accepted Answer

Rent

Answer

Wages

Answer

Utilities

Answer

Raw materials

Question 38

Economies of scale refer to:**

Accepted Answer

The advantages a firm gains by producing a large volume of output

Answer

The disadvantages a firm faces when producing a small volume of output

Answer

The cost of producing each additional unit of output

Answer

The total cost of production

Question 39

Which of the following is an internal economy of scale?

Accepted Answer

Specialization of labor

Answer

Bulk discounts on raw materials

Answer

Government subsidies

Answer

Economies of agglomeration

Question 40

A firm is experiencing diseconomies of scale. This means that:

Accepted Answer

Its average total cost is increasing as output increases

Answer

Its marginal cost is increasing as output increases

Answer

Its average variable cost is decreasing as output increases

Answer

Its fixed cost is decreasing as output increases

Question 41

Which of the following is **not** a potential benefit of specialization?

Accepted Answer

Increased demand

Answer

Increased productivity

Answer

Reduced costs

Answer

Enhanced product quality

Question 42

A firm's production function is Q = 2L^0.5K^0.5. What is the firm's elasticity of output with respect to capital?

Accepted Answer

0.5

Answer

0.25

Answer

1

Answer

2

Question 43

Which of the following is NOT considered a factor of production?

Accepted Answer

Government regulations

Answer

Labor

Answer

Land

Answer

Capital

Question 44

A firm's short-run total cost curve (TC) is typically U-shaped because:

Accepted Answer

Variable costs increase at a faster rate than fixed costs as output increases.

Answer

Fixed costs decrease as output increases.

Answer

Variable costs remain constant as output increases.

Question 45

Which of the following is NOT a potential advantage of economies of scale?

Accepted Answer

Increased inflexibility

Answer

Reduced average production costs

Answer

Increased efficiency

Answer

Increased market share

Question 46

The concept of marginal cost refers to:

Accepted Answer

The change in total cost resulting from producing one additional unit of output.

Answer

The average cost of producing all units of output.

Answer

The fixed cost per unit of output.

Question 47

Which of the following costs is an explicit cost for a firm?

Accepted Answer

Rent

Answer

Economic profit

Answer

Implicit cost

Answer

Opportunity cost

Question 48

A firm is said to be experiencing increasing returns to scale when:

Accepted Answer

Output increases at a faster rate than the increase in inputs.

Answer

Output increases at a constant rate relative to the increase in inputs.

Answer

Output decreases at a constant rate relative to the increase in inputs.

Question 49

Which of the following is an example of a fixed cost?

Accepted Answer

Rent

Answer

Labor wages

Answer

Utilities

Answer

Raw materials

Question 50

In a perfectly competitive market, a firm will produce where:

Accepted Answer

Marginal cost equals price.

Answer

Profit is maximized.

Answer

Total cost is minimized.

Answer

Average cost equals price.

Question 51

Which of the following factors can shift a firm's cost curve upward?

Accepted Answer

An increase in input prices

Answer

Technological advancements

Answer

An increase in output level

Answer

Government subsidies

Question 52

A firm's average fixed cost (AFC) curve:

Accepted Answer

Slopes downward as output increases.

Answer

Slopes upward as output increases.

Answer

Is U-shaped.