CA Foundation Theory of Cost — practice questions
42 free MCQs with worked solutions. Tap any question for the answer + explanation, or practice them all in the app.
Practice CA Foundation Theory of Cost in the app →A firm pays wages to workers, buys raw materials, and pays rent for its hired premises. In economic terminologThe interest an entrepreneur could have earned by investing his own capital elsewhere, plus the salary he coulIf a firm's total revenue exactly covers both its explicit costs and its implicit costs, then the firm is earnA cloth mill spins its own yarn and then weaves it into cloth. While judging the profitability of the weaving Expenditure already incurred on advertising, R&D and specialised equipment that cannot be recovered if the firWhen prices are rising, the money outlay required today to buy a new machine identical to an old one will exceA factory's total cost to society includes the private cost it pays for plus the pollution it imposes on a neaElectricity charges for a workshop consist of a flat monthly meter rent plus a usage charge that rises with unA supervisor's salary stays constant over a range of output but jumps to a new higher level the moment a seconIn the short run, which one of the following is a variable cost?The short-run total cost of a firm is composed of which two elements?On a short-run cost diagram, the vertical distance between the Total Cost (TC) curve and the Total Variable CoThe total variable cost curve starts from the origin and initially rises at a decreasing rate, then later at aA firm has a total fixed cost of ₹ 2,000. When it produces 100 units the average fixed cost is ₹ 20. If outputWhy does the average fixed cost (AFC) curve slope downward throughout its length yet never touch the X-axis?Which one of the listed short-run cost curves is the only one that is never 'U' shaped?A firm's total fixed cost is ₹ 1,000. Using AFC = TFC/Q, what is the average fixed cost when 8 units are produAt an output of 7 units a firm has total fixed cost ₹ 1,000 and total variable cost ₹ 400. Using AVC = TVC/Q, A firm produces 10 units with total fixed cost ₹ 1,000 and total variable cost ₹ 670. Its average total cost (Total cost is ₹ 1,570 at 9 units of output and ₹ 1,670 at 10 units. Using MC = TCₙ − TCₙ₋₁, the marginal cost A firm's total cost is ₹ 200 when it produces 5 units and ₹ 320 when it produces 10 units. The marginal cost pConsider the cost data: Output (Q): 0, 1, 2, 3, 4, 5, 6 and Total Cost (₹): 240, 330, 410, 480, 540, 610, 690.Consider the cost data: Output (Q): 0, 1, 2, 3, 4, 5, 6 and Total Cost (₹): 240, 330, 410, 480, 540, 610, 690.When average cost is falling as output rises, the relationship between marginal cost (MC) and average cost (ACAt the point where the average cost curve reaches its minimum, the marginal cost curve:Marginal cost is said to be independent of fixed cost. The reason is that:A firm's average total cost is ₹ 300 at 5 units of output and ₹ 320 at 6 units. The marginal cost of producingA firm producing 7 units has an average total cost of ₹ 150 and must pay ₹ 350 to its fixed factors whether orA firm has a total variable cost of ₹ 1,000 at 5 units of output, and its fixed costs are ₹ 400. What is the aA firm's average fixed cost is ₹ 20 when it produces 6 units. What will its average fixed cost be at 4 units oWhich of the following correctly states the relationship among the average cost functions?In the long run, a firm can vary all of its factors of production. The long-run cost of producing any given leThe long-run average cost (LAC) curve is often called the 'planning curve' and the 'envelope curve' because itThe LAC curve is tangent to the minimum point of a short-run average cost curve at only one output level. At tThe 'U' shape of the long-run average cost curve, unlike that of the short-run average cost curve, is explaineEmpirical studies of modern firms suggest the long-run average cost curve is often 'L-shaped' rather than 'U-sWith which one of the following costs is the concept of marginal cost most closely related?Which of the following statements about the relationship between marginal cost (MC) and average total cost (ATWhich one of the following is an example of an explicit cost?Which one of the following is an example of an implicit cost?In the short run, as the output of a firm steadily increases, its average fixed cost (AFC):A firm's average variable cost falls as output rises from zero toward normal capacity but rises steeply beyond