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CA Foundation Unit 3: Production, Cost & Perfect Competition — practice questions

Explore 52 free Unit 3: Production, Cost & Perfect Competition questions in CA Foundation Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Unit 3: Production, Cost & Perfect Competition questions and exercises with answers

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Marginal cost is defined as theRead the answer and worked solution →CA Foundation · Economics · Production & Cost — Tap OrderRead the answer and worked solution →In Economics, which of the following activities counts as production?Read the answer and worked solution →Production in Economics is best described as the creation of:Read the answer and worked solution →Transporting apples from Kashmir orchards to crowded city markets, where they satisfy more people, is an example of conferring:Read the answer and worked solution →Which factor of production is described as a free gift of nature whose total supply for the economy is perfectly inelastic?Read the answer and worked solution →According to Schumpeter, the true function of an entrepreneur is to:Read the answer and worked solution →Which single function of an entrepreneur cannot be delegated to paid managers and is therefore regarded as the most important?Read the answer and worked solution →A period is defined as the short run in production analysis when:Read the answer and worked solution →Using the product schedule, 3 units of labour yield a total product of 330 units. What is the average product (AP) of labour at this level?Read the answer and worked solution →In the product schedule, total product rises from 330 units (at 3 workers) to 440 units (at 4 workers). The marginal product of the 4th worker is:Read the answer and worked solution →From the product schedule, total product is 600 units at 6 workers and 670 units at 7 workers. The average product at 7 workers is approximately:Read the answer and worked solution →When the average product of a variable factor is rising as more units are employed, the marginal product is:Read the answer and worked solution →The Law of Variable Proportions describes the behaviour of output when:Read the answer and worked solution →A rational producer will choose to operate in which stage of the Law of Variable Proportions?Read the answer and worked solution →If a firm doubles all of its inputs and as a result its output exactly doubles, the firm is experiencing:Read the answer and worked solution →Constant returns to scale is also known by which of the following names?Read the answer and worked solution →In the Cobb-Douglas function Q = K L^a C^b, decreasing returns to scale result when:Read the answer and worked solution →Decreasing returns to scale set in mainly because of:Read the answer and worked solution →An isoquant is best defined as a curve representing:Read the answer and worked solution →Isoquants are convex to the origin because of:Read the answer and worked solution →The least-cost combination of factors for producing a given output occurs at the point where:Read the answer and worked solution →In the short run, which one of the following is a variable cost?Read the answer and worked solution →The short-run total cost of a firm is composed of which two elements?Read the answer and worked solution →Which one of the listed short-run cost curves is the only one that is never 'U' shaped?Read the answer and worked solution →A firm's total fixed cost is ₹ 1,000. Using AFC = TFC/Q, what is the average fixed cost when 8 units are produced?Read the answer and worked solution →At an output of 7 units a firm has total fixed cost ₹ 1,000 and total variable cost ₹ 400. Using AVC = TVC/Q, the average variable cost is:Read the answer and worked solution →A firm produces 10 units with total fixed cost ₹ 1,000 and total variable cost ₹ 670. Its average total cost (ATC = TC/Q) is:Read the answer and worked solution →Total cost is ₹ 1,570 at 9 units of output and ₹ 1,670 at 10 units. Using MC = TCₙ − TCₙ₋₁, the marginal cost of the 10th unit is:Read the answer and worked solution →A firm's total cost is ₹ 200 when it produces 5 units and ₹ 320 when it produces 10 units. The marginal cost per unit over this range, using MC = ΔTC/ΔQ, is:Read the answer and worked solution →

Worked practice questions

Marginal cost is defined as the

  1. total cost divided by output
  2. cost of the first unit
  3. fixed cost per unit
  4. addition to total cost from producing one more unit
Show answer and solution

Correct answer: D. addition to total cost from producing one more unit

Marginal cost = ΔTotal Cost / ΔOutput — the extra cost of producing one additional unit.

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CA Foundation · Economics · Production & Cost — Tap Order

Read exercise and reference answers
Steps
  1. Identify production function
  2. Determine fixed and variable inputs
  3. Choose technology that minimises cost
  4. Compute output at chosen input mix
  5. Decide if it maximises profit
Instructions
Tap the steps of a producer's decision process in order.

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In Economics, which of the following activities counts as production?

  1. A maid servant cleaning a house for wages
  2. A homemaker cooking a meal for her family
  3. A volunteer teaching children without any charge
  4. A farmer growing vegetables only for self-consumption
Show answer and solution

Correct answer: A. A maid servant cleaning a house for wages

1. Production in Economics is any activity that converts inputs into outputs meant for exchange in the market. 2. Intention to exchange (earning income) is essential; work done out of love, voluntary service, and goods for self-consumption are excluded. 3. The maid servant works for wages, so her service is production. 4. The homemaker, the volunteer, and the self-consuming farmer all act outside the market, so none of those qualify. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit I "Theory of Production", p.5_

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Unit 1A: Scarcity, Choice and Opportunity CostUnit 2A: Demand, Supply and Market EquilibriumTheory of Consumer Behaviour & DemandUnit 5: Factor Markets & Resource AllocationUnit 4: Imperfect Competition & Market StructuresTheory of Demand & Elasticity