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SAM P L
QUE E
S T I ON S
o mi c s
Micro e co n
GE
THEORIES OF PRODUCTION AND COSTS:
1.Which of the following best describes the
“Production function?”
a. it indicates the best output to produce
b. it relates physical inputs to physical
outputs
c. it relates peso inputs to peso outputs
d. it indicates the best to combine factors to
produce any given product

2. A total product curve (TP) indicates the

relationship between:
a. input and price c. input and
output
3. This law states that if one kind of an
input is increased and added in equal
amount to some fixed amount of
resources, per unit of time, total product
(TP) will increase first at an increasing
rate, then at a decreasing rate, reaches
maximum and then declines:
a. Law of diminishing marginal utility
b. Law of demand and supply
c. Law of diminishing returns
d. Law of production
4. The total amount of product (Q) produced
divided by the number of units of input (I) is:
a. Total Product (TP) c. Marginal Product (MP)
b. Average Product (AP) d. None of the above

5. The addition to total product resulting from

employing as additional unit of input is:
a. Average product c. Marginal product
b. Total product d. A production function

6. The irrational stages of production are:

a. stages I and II c. stages I and III
b. stages II and III d. stage III
7. When marginal product is at zero, total
product is:
a. declining c. maximum
b. minimum d. negative

8. The rational stage of production is:

a. Stage I c. Stage III
b. Stage II d. None of these

9. The cost that a firm incurs in purchasing

or hiring any factor of production is
referred to as:
a. Explicit cost c. Variable cost
b. Implicit cost d. Fixed cost
10. The cost that depends on the level of
output is:
a. variable cost c. total cost
b. fixed cost d. average cost

11. All of the following curves are U-shaped

except
a. The average variable cost (AVC) curve
b. The average fixed cost (AFC) curve
c. The average cost (AC) curve
d. The marginal cost (MC) curve
12. If we consider the proportion of total
expenditure shared by each unit of
output, we are thinking of
a. TC c AVC
b. MC d. AC or ATC

13. If we consider the cost associated with

producing another unit of output, we are
thinking of:
a. TFC c. MC
b. TC d. AVC
FOR ITEMS 14-18, refer to the following table
below.
Qty. of output Total cost
0 100
15 110
34 120
48 130
60 140
62 150

14. Total fixed cost is equal to:

a. 70 b. 80 c. 90 d. 100

15. Marginal cost at the 3rd level output is

equal to:
a. 0.71 b. 0.81 c. 0.91 d. 0.61
FOR ITEMS 14-18, refer to the following table
Qty.below.
of output Total cost
0 100
15 110
34 120
48 130
60 140
62 150

16. Average variable cost at the 5th level of out put

is equal to:
a. 0.71 b. 0.81 c. 0.91
d. 0.61

17. Average fixed cost at the 4th level of output is

equal to:
a. 1.47 b. 1.57 c. 1.67
d. 1.77
For numbers 19-22, refer to the data below:
Product selling price per unit = P 80,000
Variable cost per unit = P 40,000
Fixed cost = P 120,000

19. The break-even quantity of output is

equal to:
a. 1 b. 3 c. 3.5 d. 4 units

20. The total revenue of the firm at break-

even point is equal to:
a. P70,000 b. P140,000 c. P210,000
d. P240,000
21. The total variable cost (TVC) of the firm
at break-even is equal to:
a. P100,000 c. P140,000
b. P120,000 d. P160,000

22. If the firm’s target profit is P80,000, the

quantity of product produce to meet the
target profit must be:
a. 2 c. 4
b. 3 d. 5 units
23. Marginal cost and average cost are related
in this way:
a. when MC is less than AC, AC is falling
b. when MC is greater than AC, is falling
c. When MC is equal to AC, MC is at a
minimum
d. none of the above

24. At any level of output

a. AVC will exceed AC in the short run
b. MC will exceed AVC by the level of AFC
c. AVC will exceed AFC by the level of AC
d. AC will exceed AVC by the level of AFC
PRICE AND OUTPUT DETERMINATION:
25. The demand curve faced by the firm is a
perfectly competitive output market is:
a. Upward-sloping c. Vertical
b. Downward-sloping d. Horizontal

26. The amount by which the firm’s total

revenue change when its output or sales
are changed by one unit is called:
a. Marginal cost (MC) c. Average revenue
(AR)
b. Average cost (AC) d. Marginal revenue
(MR)
27. The supply curve of a firm in perfect
competition in the short run is the same
thing as:
a. The rising segment of its marginal cost
curve above minimum average variable
cost
b. The rising segment of its marginal cost
curve above minimum average cost
c. The rising segment of its average cost
curve
d. Its entire marginal cost curve
28. Which of the following describes any firm at
its maximum-profit equilibrium?
a. The slopes of the TR and the TC curves are the
same
b. Marginal revenue always equals average
revenue
c. The slope of the total profit curve is 1
d. Marginal cost always equals total revenue
29. If price exceeds average variable cost but its
smaller than average cost at its best level of
output, the firm is:
a. Making a profit
b. Incurring a loss but should continue to produce in its
short run
c. Incurring a loss and should stop producing immediately
d. Breaking-even
30. At a price situation where AVC < P <
AC, the firm will decide to continue
producing because:

a. There are still costumers willing to buy

firm’s produce
b. No, the statement is wrong and the firm
should cease producing
c. Even at a loss , the firm can recover part of
its variable cost and Its fixed cost
d. Even at a loss, the firm can recover part of
its fixed cost and its variable cost
31. In the perfectly competitive sense,
which of the following is NOT true if P =
Acmin.
a. The firm should continue producing
b. The firm is producing at output where
P=MR=Acmin
c. The firm is breaking even
d. The firm is incurring losses

32. A firm’s shut down point is the minimum

value of:
a. Total variable cost c. Total cost
b. Average variable cost d. Average cost
33. Profit maximizing output implies that:
a. The slope of the TR curve is equal to the slope
of the TC curve
b. Marginal revenue = marginal cost
c. (TR – TC) is maximum
d. All of the above

34. A firm should continue to operate at a loss

in the short run if:
a. The owner enjoys helping his/her customers
b. The firm will show a profit
c. It can recover its variable costs and some fixed
costs
d. The firm cannot produce any products more
profitably
35. The demand curve faced by a monopolist:
a. perfectly inelastic
b. the same as the market demand curve
c. upward sloping
d. perfectly elastic

DEMAND and SUPPLY

36. The demand curve is sloping downward
because:
a. price and quantity demanded are directly
related
b. price and quantity demanded are inversely
related
c. price and quantity demanded are not related
d. none of the above
37. The supply curve is sloping upward because:
a. price and quantity supplied are directly related
b. price and quantity supplied are inversely
related
c. price and quantity supplied are not related
d. none of the above

38. A change in demand or supply is:

a. caused by a change in price of the good itself
b. presented by a movement from one point to
another on the demand curve
c. caused by a change in any of the determinants
of demand or supply and is presented by a
shift of the entire D or S curve
d. none of the above
39. When the current price exceeds the
equilibrium price, there is a:
a. shortage and price will rise
b. shortage and price will fall
c. surplus and price will rise
d. surplus and price will fall

40. When there is a price floor on the price of

palay
a. supply of palay increases because of the higher
price
b. quantity supplied increases because of the high
price
c. quantity demanded will decrease because of the
high price