# Important MCQs of Cost Microeconomics class 11

Looking for important MCQs of Cost chapter with answers of Microeconomics class 11 CBSE, ISC, and other state board.

## Multiple Choice Questions of Cost chapter with answers of Microeconomics class 11

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Identify the two cost curves which start from the same point on the Y-axis:

a) TVC and TFC
b) TFC and AVC
c) TFC and TC
d) TFC and AFC

Ans – c)

Salary of Permanent Staff is which type of cost?

a) Variable and Implicit Cost
b) Fixed and Implicit Cost
c) Fixed and Explicit Cost
d) Variable and Explicit Cost

Ans – c)

The cost curve, which is inversely S-shaped is:

a) Average Cost curve
b) Total Fixed Cost curve
c) Total Variable Cost Curve
d) Marginal Cost Curve

Ans – c)

Which curve is not affected by fixed cost?

a) MC curve
b) TC Curve
c) AC curve
d) AFC Curve

Ans – a)

Marginal cost refers to the addition to the total cost when one more unit of output is ______ .

a) Wasted
b) Produced
c) Employed
d) Sold

Ans – b)

MC can be derived from:

a) TC
b) TVC
c) AC
d) AFC

Ans – a), b)

Average Fixed Cost:

a) Remain same at all levels of output
b) Increase as output increases
c) Decreases as output increases
d) Refers to per-unit fixed cost of production

Ans – c), d)

All the curves except _ are U shaped curves:

a) Average Fixed Cost Curve
b) Average Variable Cost Curve
c) Average Cost Curve
d) Marginal Cost Curve

Ans – a)

The area under MC Curve is equal to:

a) TVC
b) AFC
c) AVC
d) AC

Ans – a)

Which formula is incorrect to determine the value of TC:

a) TC = TVC + TFC
b) TC = ∑MC
c) TC = AVC × Output
d) TC = ∑MC + TFC

Ans – b), C)

Normal Profits earned by a firm are included in:

a) Implicity Cost
b) Explicit Cost
c) Fixed Cost
d) Variable Cost

Ans – a)

The shape of the total fixed cost curve is:

a) U-shaped
b) Downward Sloping
c) Inversely S-Shaped
d) Horizontal straight line parallel to the x-axis

Ans – d)

Cost Function is a __ Concept:

a) Economical
b) Functional
c) Financial
d) Technical

Ans – b)

Nishant, Tavleen and Manas are confused with the formula for deriving TC:

a) Nishant says: TC = TVC + TFC
b) Tavleen Says: TC = AC × Output
c) Manas Says: TC = ∑MC + TFC

Identify who amongst them is correct.

a) Nishant
b) Manas
c) Tavleen
d) All of them

Ans – d)

TFC is ₹20 at the 2nd unit of output and MC at the 3rd unit is ₹5. TFC and 3rd unit of output will be:

a) ₹15
b) ₹20
c) ₹25
d) ₹5

Ans – b)

MC curve intersects AC Curve at its point and AVC curve at its _ point.

a) Maximum, Minimum
b) Minimum, Minimum
c) Minimum, Maximum
d) Maximum, Maximum

Ans – b)

AC, AVC, and MC curves are ‘U’ shaped because of :

a) Law of Diminishing Marginal Utility
b) Law of Diminishing Returns
c) Law of Variable Proportions
d) None of these

Ans – c)

Which two curves are intersected by the MC curve at their minimum points:

a) AC and AVC
b) AVC and AFC
c) AC and AFC
d) AC and TVC

Ans – a)

The minimum point of the MC curve comes before the minimum point of:

a) AC curve
b) AVC curve
c) Both a) and b)
d) Neither a) nor b)

Ans – c)

AVC can fall even when MC is rising, provided:

a) MC < AVC b) MC > AVC
c) MC = AVC
d) None of these

Ans – a)

Which condition is correct:

a) AC can rise when MC is falling
b) AC can fall when MC is rising
c) AVC can fall when MC is rising
d) AC can rise when MC is rising

Ans – b), c), d)

Which one of the following is also known as fixed cost?

a) Supplementary cost
b) Prime Cost
c) Indirect Cost
d) Avoidable Cost

Ans – a), C)

The Cost which is never zero even when production is stopped is known as :

a) Supplementary Cost
b) Prime Cost
c) Explicit Cost
d) Implicity Cost

Ans – a)

AC is obtained by dividing TC by the level of:

a) labour employed
b) Output produced
c) Units consumed
d) Output sold

Ans – b)

When a change in total cost is divided by change in output, we get:

a) Average Cost
b) Total Variable Cost
c) Marginal Cost
d) Average Variable Cost

Ans – c)

Which of the following Cost curves is rectangular hyperbola?

a) Average Cost curve
b) Marginal Cost Curve
c) Average Variable Cost curve
d) Average fixed cost curve

Ans – d)

When AC is rising MC is:

a) Equal to AC
b) More than AC
c) Less than AC
d) Constant

Ans – b)

The minimum point of AC occurs to the right of minimum point of:

a) TC
b) TVC
c) AFC
d) AVC

Ans – d)

MC Curve is common to both:

a) AFC and TFC
b) AC and AVC
c) AVC and AFC
d) AC and AFC

Ans – b)

In the short run, the total cost curve starts from:

a) Origin
b) Positive vertical intercept
c) Positive horizontal intercept
d) None of these

Ans – b)

Identify the correct mathematical expression.

a) TC = TFC – TVC
b) TVC = TFC – TC
c) TFC = TC – TVC
d) TC = MC + TFC

Ans – c), d)

AFC curve:

a) Touches the X-axis
b) Touches the Y-axis
c) Touches both X-axis and Y-axis
d) Does not touch either of the axes

Ans – d)

As output arises:

a) AVC curve and AC curve move away from each other
b) AVC curve and AC curve come closer and closer to each other
c) AVC curve and AC curve meets after sometime
d) AVC curve and AV curve come closer and closer to each other but do not meet

Ans – d)

A firm producing 6 units of output has an average total cost of ₹150 and has to pay ₹240 to its fixed factors of production. In the given case, the average variable cost at 6 units of output will be:

a) ₹150
b) ₹900
c) ₹110
d) ₹1440

Ans – c)

Which cost increases continuously with an increase in production?

a) Average Cost
b) Marginal Cost
c) Variable Cost
d) Fixed Cost

Ans – c)

Which of the following is true with respect to the relationship between AC and MC?

a) When MC>AC, AC rises
b) AC curve intersects MC curve at minimum MC
c) MC curve intersects AC curve at minimum AC
d) When MC<AC, ATC rises

Ans – a), c)

A firm has a variable cost of ₹1,000 at five units of output. If fixed costs are ₹400,
what will be the average total cost at five units of output?

a) ₹280
b) ₹80
c) ₹200
d) ₹1400

Ans – a)

Which of the following is a variable cost for a firm?

a) Payment for raw material
b) Monthly rent
d) Wages to employees

Ans – a), d)

A firm’s average fixed cost (AFC) is ₹20 at six units of output. What will be AFC at four
units of output?

a) ₹20
b) ₹30
c) ₹40
d) ₹50

Ans – b)

Which of the following statements is true?

a) ATC = AFC + AVC
b) AVC = AFC + ATC
c) AFC = ATC + AVC
d) AFC = ATC – AVC

Ans – a), d)

__________ cost refers to the actual payment made by the entrepreneur to the providers of factor
services.

a) Explicit
b) Implicit
c) Variable
d) Fixed

Ans – a)

The distinction drawn between fixed and variable costs is based on:

a) Whether the costs can or can not be changed during the life of the plant
b) Whether the costs do or do not vary with the output produced in the long run
c) Whether the costs do not enter the calculation of total costs
d) Whether the costs do or do not vary with the output produced in the short run

Ans – d)

Which of the following is an example of ‘Implicit Cost’?

a) Interest that could have been earned on retained earnings used by the firm to finance
expansion
b) Payment of Rent by the firm
c) Imputed rent of shop owned by the owner
d) Interest Payment made by the Firm for funds borrowed from a Bank

Ans – a), c)

If a resource can be put only to a particular use, then the opportunity cost is:

a) Applicable and Quantifiable
b) Applicable but not quantifiable
c) Not applicable at all
d) None of these

Ans – c) 