MCQs on Producer Behaviour and Supply

Producer behaviour and supply focuses on areas like production, distribution and supply of goods and services. It also talks about the variable and fixed factors that influence the overall cost and output, along with the concept of diminishing marginal returns.

We have listed below the important multiple-choice questions on producer behaviour and supply to help students understand the topic.

  1. Which of the following statements is true about the production function?
    1. It shows the technological relationship between cost and inputs
    2. It shows the technological relationship between output and input
    3. It shows the technological relationship between price and inputs
    4. It shows the economic relationship between output and input
  2. Answer: b

  3. Which of the following is the true meaning of opportunity cost?
    1. It is the next best alternative that is available in a given situation
    2. It is the next best alternative that is sacrificed in a given situation
    3. Both a and b are correct
    4. Both a and b are incorrect
  4. Answer: b

  5. Which of the following economists gave the statement ‘Supply creates its own demand’?
    1. Jean-Baptiste Say
    2. James Madison
    3. Thomas Jefferson
    4. None of the above
  6. Answer: a

  7. A firm comes to the point of shutdown when ________.
    1. The total revenue is equal to the total variable cost
    2. The total revenue is equal to the total cost
    3. The marginal cost is equal to the average cost
    4. The total cost is equal to the average variable cost
  8. Answer: a

  9. When the total revenue is greater than the total cost, it is a situation of _______.
    1. Normal losses
    2. Abnormal losses
    3. Normal profits
    4. Abnormal profits
  10. Answer: d

  11. A firm makes ______ at the break-even point.
    1. Abnormal profits
    2. Abnormal losses
    3. Normal profits
    4. None of the above
  12. Answer: c

  13. Any movement along the supply curve happens because of _______.
    1. Decrease in the own price of a commodity
    2. Increase in the own price of a commodity
    3. Both a and b are incorrect
    4. Both a and b are correct
  14. Answer: d

  15. Which of the following is an example of a fixed cost?
    1. The wages and salaries of employees
    2. The interest on fixed capital
    3. The electricity bill
    4. None of the above
  16. Answer: b

  17. Which of the following statements is true?
    1. When the production is zero, the total cost will also be zero
    2. When the production is zero, the total cost will be equal to variable cost
    3. When the production is zero, the total cost will be equal to the total fixed cost
    4. When the production is zero, the total cost will be equal to marginal cost
  18. Answer: c

  19. When the marginal cost curve cuts the average cost curve, then the _______.
    1. The average cost will be equal to the marginal cost
    2. The average cost will be less than the marginal cost
    3. The average cost will be greater than the marginal cost
    4. None of the above
  20. Answer: a

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