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Economics · Class 12 Commerce

Ch 18Producer Behaviour — Class 12 Economics, concept-first.

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Cost Concepts: Fixed, Variable, Average and Marginal Cost

Fixed cost (e.g. rent on a factory, insurance on machinery) does not change with the level of output, even at zero output; variable cost (e.g. raw materials, casual labour) rises and falls directly with output. Average F…

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Questions & Answers

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+Sample & Board questionsi34 questions
  1. Q1What do you mean by average cost of a firm? **Or** Give two examples of a firm's variable cost.Preview
  2. Q2Explain, with the help of a diagram, the relation between average and marginal product. **Or** Explain the concepts of internal and external…Preview
  3. Q3The minimum point of average cost curve is called— (a) shut down point (b) point of minimum loss (c) point of no-profit no-loss (d) point of…Preview
  4. Q4The average cost curve in the short run is— (a) concave (b) downward sloping (c) upward rising (d) U-shaped.Preview
  5. Q5Write true or false: In a monopoly market, AR is always equal to MR. **Or** Write true or false: A monopolistic firm earns only normal profi…Preview
  6. Q6Give two examples of a firm's fixed cost of production. **Or** Define marginal cost of production of a firm.Preview
  7. Q7Explain the short run law of variable proportions in the process of production. **Or** Explain the Laws of Returns to scale of production.Preview
  8. Q8The first order or necessary condition for profit maximisation of any firm is (a) MR = MC (b) MR > P (c) MR < MC (d) MC curve slopes down.Preview
  9. Q9Marginal Cost (MC) curve (a) never slopes downwards (b) initially slopes down and then slopes up (c) never slopes upwards (d) intersects the…Preview
  10. Q10Write true or false: The monopolist is a price maker. **Or** Write true or false: Under monopoly, price is always equal to marginal cost.Preview
  11. Q11Give two examples of a firm's variable cost of production. **Or** If in the production process only constant returns to scale prevails, what…Preview
  12. Q12Show how a firm's marginal revenue and average revenue are related when the market price remains unchanged.Preview
  13. Q13Analyse the relationship involving total product, average product and marginal product in three stages of a production process.Preview
  14. Q14Show how a perfectly competitive firm earns only normal profit as it attains long run equilibrium. **Or** Show how the price in a perfectly…Preview
  15. Q15The second order or sufficient condition for maximization of profit of a firm in a perfectly competitive market is— (a) Marginal Revenue = M…Preview
  16. Q16In the short run, the average fixed cost curve is— (a) upward rising (b) rectangular hyperbola (c) U-shaped (d) concave.Preview
  17. Q17In the short run, what is the shape of the average variable cost curve? (a) concave (b) rectangular hyperbola (c) parallel to the x-axis (d)…Preview
  18. Q18The condition necessary — or first-order condition — for any firm's profit to be maximum is— (a) Price = Marginal Revenue (b) Marginal Reven…Preview
  19. Q19Fill in the blank: In a ___ market, the seller determines the price of his own product. **Or** Fill in the blank: In a monopoly market, marg…Preview
  20. Q20Give two examples of a firm's fixed cost of production. **Or** Define a firm's marginal cost of production.Preview
  21. Q21Show how the short run and the long run can be distinguished in the production process.Preview
  22. Q22The marginal cost curve— (a) first falls and then rises (b) never rises (c) intersects the average cost curve at its minimum point (d) never…Preview
  23. Q23In a perfectly competitive market, the second (sufficient) condition for profit to be maximum is— (a) MC = Marginal Revenue (b) Marginal Rev…Preview
  24. Q24Fill in the blank: ___ profit is included in the cost of production. **Or** Fill in the blank: Under the cost-determines-price theory, the i…Preview
  25. Q25Define the average cost of production. **Or** Give two examples of a firm's variable cost.Preview
  26. Q26If the market price remains constant, show what the relationship between a firm's marginal revenue and average revenue will be.Preview
  27. Q27Briefly discuss the relationship between average product and marginal product. **Or** Explain the laws of returns to scale that operate due…Preview
  28. Q28Mention the five main characteristics of a perfectly competitive market. **Or** Show how a perfectly competitive firm's short-run supply cur…Preview
  29. Q29Average fixed cost curve will be— (A) downward sloping (B) horizontal (C) U-shaped (D) upward sloping.Preview
  30. Q30When the average cost is minimum, then the marginal cost is— (A) greater than average cost (B) less than average cost (C) equal to average c…Preview
  31. Q31For which of the following situations does a perfectly competitive firm stop production in the short term? (A) P > AC (B) P = AC (C) P < AVC…Preview
  32. Q32If the firm is a price taker, then the relation between AR and MR will be— (A) AR > MR (B) AR = MR (C) AR < MR (D) None of these.Preview
  33. Q33Write one difference between fixed cost and variable cost of production. **Or** Why is the fixed cost component not included in marginal cos…Preview
  34. Q34Explain the law of variable proportions in production. **Or** State the merits of internal economies of large scale production.Preview