Tag: production and costs

Questions Related to production and costs

In short run when the level of production increases, average fixed cost will____.

  1. remain same

  2. decrease

  3. increase

  4. all the three possible depending upon the merit of case


Correct Option: B
Explanation:
The AFC curve is asymptotic to to both the x and y axis as the fixed cost can never be 0 since fixed cost is positive. It slopes downwards throughout its length from left to right showing continuous fall in average fixed cost with an increase in output. 

In the long run ___________.

  1. all inputs are fixed

  2. all inputs are variable

  3. some inputs are fixed and rest are variable

  4. a few are variable and rest are fixed


Correct Option: B
Explanation:

In the long run all inputs are variable as there is enough time for all factors to adjust according to the requirements for achieving least cost output. 

Which of these statement is more appropriate for Fixed costs ____________?

  1. Fixed cost is fixed only in short run

  2. It is fixed in long run also

  3. It varies with the change in level of output

  4. It is strictly avoidable in short run also


Correct Option: A

In the short run with the increase in output ____________.

  1. The fixed cost also increases

  2. Total variable cost increase in totality but total fixed cost remain same

  3. Total variable cost falls along with fixed cost

  4. Average variable cost falls


Correct Option: B