Free The Theory of the Firm 01 Practice Test - 11th Grade - Commerce
Question 1
The profit of a firm is given by
(P−SAC)×q
(SAC−P)×q
(P−AVC)×q
(AVC−P)×q
SOLUTION
Solution : A
The profit of a firm is given by (P−SAC)×q
Question 2
The slope of the TFC curve is equal to
AFC
1
-1
0
SOLUTION
Solution : D
Slope of TFC curve = 0 since TFC is a constant. TFC curve is a straight line parallel to the x-axis.
Question 3
The numbers of units produced by a firm and the corresponding costs are tabulated below.
No. of unitsTotal cost100Rs 2000250Rs 3500
Assuming constant variable cost per unit, calculate the AFC for 100 units.
Rs 10
Rs 20
Rs 100
Rs 1000
SOLUTION
Solution : A
Let the fixed cost be F and the variable cost per unit be v.
F +100 v = Rs 2000
F + 250 v = Rs 3500
On solving, we get F = 1000 =TFC and v = 10 = AVC
Now, AFC = TFC / 10 = 1000/100 = Rs 10
Question 4
The slope of the TC curve gives
MC
SAC
AVC
0
SOLUTION
Solution : A
The slope of the TC curve = ΔTC/Δq
= MC
Question 5
What is the shape of the AFC curve?
Parabola
Straight line
Rectangular hyperbola
U-shaped
SOLUTION
Solution : C
Shape of the AFC curve is a rectangular hyperbola.
Question 6
If we multiply the x and y coordinates of any point on the AFC curve, we get
TVC
ATC
TFC
1
SOLUTION
Solution : C
If we multiply the x and y coordinates of any point on the AFC curve, we get TFC since
AFC x q = TFC
Question 7
Which of the following are U-shaped?
AVC
SAC
AFC
SMC
SOLUTION
Solution : A, B, and D
AVC, SAC and SMC are U-shaped
Question 8
Which of the following pairs of curves start from the same point?
AVC and AFC
SAC and AVC
SAC and SMC
AVC and SMC
SOLUTION
Solution : D
For the first unit of output, SMC =AVC. Hence these two curves start from the same point.
Question 9
Which of the factors are responsible for the initial fall in the SAC curve?
Spreading effect
Increasing returns
Diminishing returns
Constant returns
SOLUTION
Solution : A and B
Spreading effect and increasing returns to factor are responsible for the initial fall in the SAC curve.
Question 10
Identify the correct choices.
Spreading effect dominates at lower levels of output
Diminishing returns dominates at lower levels of output
Spreading effect dominates at higher levels of output
Diminishing returns effect dominates at higher levels of output.
SOLUTION
Solution : A and D
Spreading effect dominates at lower levels of output and diminishing returns effect dominates at higher levels of output.