1. Which of the following is considered production in Economics?
A) Tilling of soil. ✓
B) Singing a song before friends.
C) Preventing a child from falling into a manhole on the road.
D) Painting a picture for pleasure.
CA Foundation Paper 4
Theory of Production MCQ
Chapter 3 • 82 Questions from ICAI Study Material
Questions
82
Est. Time
62 min
Exam Weight
12-15%
Source
ICAI Book
Question 1 of 82 0 correct | 0 wrong
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Sample Questions: Theory of Production
Preview 8 of 82 MCQs from Chapter 3
2. Identify the correct statement:
A) The average product is at its maximum when marginal product is equal to average product. ✓
B) The law of increasing returns to scale relates to the effect of changes in factor proportions.
C) Economies of scale arise only because of indivisibilities of factor proportions.
D) Internal economies of scale can accrue when industry expands beyond optimum.
3. Which of the following is not a characteristic of land?
A) Its supply for the economy is limited.
B) It is immobile. THEORY OF PRODUCTION AND COST
C) Its usefulness depends on human efforts.
D) It is produced by our forefathers. ✓
4. Which of the following statements is true?
A) Accumulation of capital depends solely on income of individuals.
B) Savings can be influenced by government policies. ✓
C) External economies go with size and internal economies with location.
D) The supply curve of labour is an upward slopping curve.
5. In the production of wheat, all of the following are variable factors that are used by the farmer except:
A) the seed and fertilizer used when the crop is planted.
B) the field that has been cleared of trees and in which the crop is planted. ✓
C) the tractor used by the farmer in planting and cultivating not only wheat but also corn and barley.
D) the number of hours that the farmer spends in cultivating the wheat fields.
6. The marginal product of a variable input is best described as:
A) total product divided by the number of units of variable input.
B) the additional output resulting from a one unit increase in the variable input. ✓
C) the additional output resulting from a one unit increase in both the variable and fixed inputs.
D) the ratio of the amount of the variable input that is being used to the amount of the fixed input that is being used.
7. Diminishing marginal returns implies:
A) decreasing average variable costs.
B) decreasing marginal costs.
C) increasing marginal costs. ✓
D) decreasing average fixed costs.
8. The short run, as economists use the phrase, is characterized by:
A) at least one fixed factor of production and firms neither leaving nor entering the industry. ✓
B) generally a period which is shorter than one year.
C) all factors of production are fixed and no variable inputs.
D) all inputs are variable and production is done in less than one year.