Which one of the following cost curves is never 'U' shaped?

1

(a)

Average cost curve.

(b)

Marginal cost curve.

(c)

Average variable cost curve.

(d)

Average fixed cost curve.

Which one of the following statements is an example of "explicit cost"?

1

(a)

The wages a proprietor could have made by working as an employee of a large firm.

(b)

The income that could have been earned in alternative uses by the resources owned by the firm.

(c)

The payment of wages by the firm.

(d)

The normal profit earned by a firm.

Marginal cost is defined as:

1

(a)

The change in total cost due to a one unit change in output.

(b)

Total cost divided by output.

(c)

The change in output due to a one unit change in an input.

(d)

Total product divided by the quantity of input.

Which one of the following elements is not a determinant of the firm's cost function?

1

(a)

The production function.

(b)

The price of labour.

(c)

Taxes.

(d)

The price of the firm's output.

A firm's average fixed cost is Rs. 20 at 6 units of output. What will it be at 4 units of output?

1

(a)

Rs. 60

(b)

Rs. 30

(c)

Rs. 40

(d)

Rs. 20

When marginal cost rises, average cost will also rise.

1

(a) True

(b) False

Average variable cost can fall even when marginal cost is rising.

1

(a) False

(b) True

The difference between total cost and total variable cost falls with the increase in output.

1

(a) True

(b) False

Total Cost rises only when marginal cost rises.

1

(a) True

(b) False

With the increase in level of output, average fixed cost goes on falling till it reaches zero.

1

(a) True

(b) False

Can there be some fixed cost in the long run? If not, why?

2

(a)

No, there are no fixed costs in the long run as all the factors become variable. Fixed cost exists only in short run.

What do the short run marginal cost, average variable cost and short run average cost curves look like?

2

(a)

The Short run marginal cost, average variable cost and short run average cost curves are U-shaped because of Law of variable proportion.

Give the meaning of cost.

2

(a)

Cost of producing a good, in economics, is the sum total of explicit cost, implicit cost and certain minimum profit (normal profit).

Give two examples of fixed cost

2

(a)

(l) Rent of the building.
(II) Salary of permanent employees

Give two examples of variable costs.

2

(a)

(l) Raw materials.
(II) Labour engaged on production

What are total fixed cost, total variable cost and total cost of a firm? How are they related?

3

(a)

Why does SMC curve cut AVC curve at the minimum point of AVC curve?

3

(a)

Define total fixed cost (Supplement/ Indirect/ overhead cost).

3

(a)

What is meant by variable (prime) cost of a firm? Give examples.

3

(a)

Explain the behaviour of aver age fixed cost using numerical example.

3

(a)

The following table gives the total cost schedule of a firm. It Is also given that the average fixed cost at 4 units of output is Rs. 5. Find the TVC, TFC. AVC, AFC, SAC and SMC schedules of the firm for the corresponding values of output.

Q	TC
1	50
2	65
3	75
4	95
5	130
6	185

8

(a)

Why does difference between ATC and AVC decrease with increase in level of output? Explain.

7

(a)