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Cost Theory

This quiz covers the fundamental concepts and theories related to cost theory in economics.

15 Questions Published
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Questions

Question 1 Multiple Choice (Single Answer)

Which of the following is NOT a type of cost in cost theory?

  1. Fixed Cost
  2. Variable Cost
  3. Total Cost
  4. Opportunity Cost
Question 2 Multiple Choice (Single Answer)

The total cost of production is the sum of which two types of costs?

  1. Fixed Cost and Variable Cost
  2. Fixed Cost and Total Cost
  3. Variable Cost and Total Cost
  4. Fixed Cost and Opportunity Cost
Question 3 Multiple Choice (Single Answer)

The average cost of production is calculated by dividing the total cost by:

  1. The number of units produced
  2. The number of workers employed
  3. The amount of capital invested
  4. The price of the product
Question 4 Multiple Choice (Single Answer)

The marginal cost of production is the:

  1. Change in total cost divided by the change in output
  2. Change in fixed cost divided by the change in output
  3. Change in variable cost divided by the change in output
  4. Change in average cost divided by the change in output
Question 5 Multiple Choice (Single Answer)

The law of diminishing returns states that as more of one input is used, while holding other inputs constant, the:

  1. Marginal product of the input will increase
  2. Marginal product of the input will decrease
  3. Marginal product of the input will remain constant
  4. Total product of the input will increase
Question 6 Multiple Choice (Single Answer)

The short-run cost curve is:

  1. A curve that shows the relationship between total cost and output in the short run
  2. A curve that shows the relationship between fixed cost and output in the short run
  3. A curve that shows the relationship between variable cost and output in the short run
  4. A curve that shows the relationship between average cost and output in the short run
Question 7 Multiple Choice (Single Answer)

The long-run cost curve is:

  1. A curve that shows the relationship between total cost and output in the long run
  2. A curve that shows the relationship between fixed cost and output in the long run
  3. A curve that shows the relationship between variable cost and output in the long run
  4. A curve that shows the relationship between average cost and output in the long run
Question 8 Multiple Choice (Single Answer)

Economies of scale occur when:

  1. Long-run average cost decreases as output increases
  2. Long-run average cost increases as output increases
  3. Long-run average cost remains constant as output increases
  4. Short-run average cost decreases as output increases
Question 9 Multiple Choice (Single Answer)

Diseconomies of scale occur when:

  1. Long-run average cost increases as output increases
  2. Long-run average cost decreases as output increases
  3. Long-run average cost remains constant as output increases
  4. Short-run average cost increases as output increases
Question 10 Multiple Choice (Single Answer)

The optimal level of output for a firm is where:

  1. Marginal cost equals marginal revenue
  2. Marginal cost is greater than marginal revenue
  3. Marginal cost is less than marginal revenue
  4. Average cost is minimized
Question 11 Multiple Choice (Single Answer)

The concept of sunk cost refers to:

  1. Costs that have already been incurred and cannot be recovered
  2. Costs that will be incurred in the future
  3. Costs that are variable with respect to output
  4. Costs that are fixed with respect to output
Question 12 Multiple Choice (Single Answer)

The concept of opportunity cost refers to:

  1. The value of the next best alternative that is foregone when a decision is made
  2. The cost of the resources used in production
  3. The cost of the labor used in production
  4. The cost of the capital used in production
Question 13 Multiple Choice (Single Answer)

The concept of fixed cost refers to:

  1. Costs that do not change with the level of output
  2. Costs that change with the level of output
  3. Costs that are incurred in the short run
  4. Costs that are incurred in the long run
Question 14 Multiple Choice (Single Answer)

The concept of variable cost refers to:

  1. Costs that change with the level of output
  2. Costs that do not change with the level of output
  3. Costs that are incurred in the short run
  4. Costs that are incurred in the long run
Question 15 Multiple Choice (Single Answer)

The concept of total cost refers to:

  1. The sum of fixed and variable costs
  2. The sum of fixed and opportunity costs
  3. The sum of variable and opportunity costs
  4. The sum of fixed, variable, and opportunity costs
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