MCQ Questions Chapter 3 Production and Costs Class 12 Economics

Please refer to MCQ Questions Chapter 3 Production and Costs Class 12 Economics with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Economics issued for the current academic year. We have provided MCQ Questions for Class 12 Economics for all chapters on our website. Students should learn the objective based questions for Chapter 3 Production and Costs in Class 12 Economics provided below to get more marks in exams.

Chapter 3 Production and Costs MCQ Questions

Please refer to the following Chapter 3 Production and Costs MCQ Questions Class 12 Economics with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 3 Production and Costs Class 12 Economics

Question. In which market MR may become zero or negative ?
(a) Monopoly
(b) Monopolistic Competition
(c) Both (a) and (b)
(d) Perfect Competition

Question. In monopoly and monopolistic competition :
(a) AR = MR
(b) AR > MR
(c) AR < MR
(d) None of these

Question. With which condition, firm will get maximum profit ?
(a) Where MR = MC
(b) Where MC cuts MR from below
(c) Both (a) and (b)
(d) None of the above

Question. In perfect competition:
(a) AR = MR
(b) AR > MR
(c) MR < MC
(d) MR = MC = 0

Question. In which market AR curve is parallel to X-axis ?
(a) Perfect Competition
(b) Monopoly
(c) Monopolistic Competition
(d) In all the above

Question. The basic condition of firm’s equilibrium is:
(a) MC = MR
(b) MR = TR
(c) MR = AR
(d) AC = AR

Question. For every market, which condition has to be fulfilled for firm’s equilibrium ?
(a) AR = MC
(b) MR = MC
(c) MC should cut MR from below
(d) Both (b) and (c)

Question. For a firm’s equilibrium:
(a) MR = MC
(b) MR > MC
(c) MR < MC
(d) MR = MC = 0

Question. If other things being same, what does the positive relationship between price and supply quantity signify ?
(a) Law of Demand
(b) Elasticity of Supply
(c) Law of Supply
(d) Supply Function

Question. The figure given below shows:
(a) Extension in Supply
(b) Contraction in Supply
(c) Elasticity of supply
(d) Elasticity of demand

Question. Supply is associated with:
(a) A Time Period
(b) Price
(c) Both (a) and (b)
(d) None of the above

Question. Which of the following statement is true ?
(a) Price and quantity have direct relationship
(b) Supply curve rises from left to right
(c) Supply is affected by many factors
(d) All the above

Question. Following figure shows :
(a) Perfectly Elastic Supply
(b) Perfectly Inelastic Supply
(c) Elastic Supply
(d) Inelastic Supply

Question. e_s = 0 means that elasticity of supply is:
(a) Perfectly Elastic Supply
(b) Perfectly Inelastic Supply
(c) Less Elastic Supply
(d) Unit Elastic Supply

Question. The elasticity of a straight line supply curve originating from the centre of origin is:
(a) Less than unity,
(b) greater than unity
(c) equal to unity
(d) equal to zero

Question. When the proportionate change in the supply of goods is more than the proportionate change in its price, the elasticity of supply will be:
(a) Less than Unit
(b) Equal to Unit
(c) Greater than Unit
(d) Infinite

Question. Fixed cost is also known as:
(a) Variable cost
(b) Actual cost
(c) Supplementary cost
(d) Short-term cost

Question. Active factor of production:
(a) Capital
(b) Labour
(c) Land
(d) None of these.

Question. When TR increases at constant rate, MR should be:
(a) Increasing
(b) Decreasing
(c) Constant
(d) Zero 

Question. What happens to ATC when MC< ATC?
(a) ATC will rise
(b) ATC will fall
(c) ATC will remain constart
(d) None of these 

Question. Under perfect competition :
(a) MR curve is below AR curve
(b) Price = AR = MR
(c) AR remains constant
(d) both (b) and (c) 

Question. Under monopoly MR can be negative only when :
(a) AR is increasing
(b) AR is decreasing
(c) AR is constant
(d) AR = O 

Question. Average revenue :
(a) Can be negative
(b) Cannot be negative
(c) Is zero when TR is zero
(d) Both (b) and (c)

Question. Per unit cost of a good is called
(a) Total fixed cost
(b) Variable cost
(c) Average cost
(d) None of these

Question. The costs which vary as the level of output varies are called:
(a) Prime costs
(b) Indirect costs
(c) Real costs
(d) None of these 

Question. When MR zero, then
(a) TR is minimum
(b) TR is zero
(c) TR is maximum
(d) TR is equal to MR

Question. Which is the following statements is appropriate in case of monopoly?
(a) AR curve slopes upwards while MR curve slopes downwards
(b) Slope of both AR and MR curves is upwards
(c) Slope of both AR and MR curves is downwards and MR curve is below AR curve
(d) Slope of both AR and MR curves is downwards and MR curve is above AR curve 

Question. Which of the following curve is not ‘U’ shaped?
(a) AFC
(b) AVC
(c) MC
(d) AC

Question. Area under MC curve is …… .
(a) total cost
(b) total fixed cost
(c) total variable cost
(d) None of these

Question. In the first stage of law of variable proportions, total product increases at an …… .
(a) decreasing rate
(b) increasing rate
(c) constant rate
(d) Both (a) and (b)

Question. If AR is Rs 40 per unit from the sale of 3 goods and it is Rs 30 per unit from the sale of 4 goods. Find the marginal revenue of 4th unit of goods.
(a) Rs 10
(b) Rs 30
(c) Rs 40
(d) 0

Question. When total product falls, then …… .
(a) average product is equal to zero
(b) marginal product is equal to zero
(c) marginal product is negative
(d) average product continues to rise 

Question. Choose the correct pair.

Codes
(a) A–(i)
(b) B–(ii)
(c) C–(iii)
(d) All the pairs

Question. Average Revenue is equal to ….. . 
(a) Total Revenue / Quantity Sold
(b) Average Revenue / 2
(c) TotalRe venue / 100
(d) Average Quantity / Quantity Sold × 2

Question. Average Product (AP) is at its maximum when
(a) MP > AP
(b) MP < AP
(c) MP = AP
(d) MP becomes negative

Question. Law of variable proportion is valid when ……. .
(a) atleast one input is fixed and all other inputs are kept variable
(b) all factors are kept constant
(c) all inputs are varied in the same proportion
(d) None of the above

Question. Payment made to outsiders for their goods and services are called …… .
(a) Opportunity cost
(b) Real cost
(c) Explicit cost
(d) Implicit cost

Question. What is ‘production’ in economics?
(a) Creation/Addition to the value of output
(b) Production of foodgrains
(c) Creation of services
(d) Manufacturing of goods

Question. As output increases, average fixed cost curve …… .
(a) remains constant
(b) starts falling
(c) starts rising
(d) None of these

Question. When the firm is producing 3 tonnes of sugar, it receives total revenue of Rs 24. Raising production to 4 tonnes, increases total revenue to Rs 28. Thus, marginal revenue is …… .
(a) Rs 4
(b) Rs 8
(c) Rs 28
(d) Rs 52

Question. Increasing returns is applicable because of …… .
(a) increased efficiency of variable factor
(b) fuller utilisation of fixed factor
(c) indivisibility of factors
(d) Both (a) and (b)

Question. When average cost curve is rising, then marginal cost curve …… .
(a) must be decreasing
(b)must be constant
(c) must be rising
(d) Any of these

Question. Function showing relationship between input and output is known as …… .
(a) Consumption function
(b) Investment function
(c) Production function
(d) Cost function

Question. Statement I MC becomes zero when AC is at its minimum point.
Statement II AC, AVC and MC curves always start from the same point. 
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Question. In which time period, all factors of production become variable and factors of production change with the change in level of production?
(a) Long period
(b) Market period
(c) Short period
(d) All of these 

Question. Statement I Total revenue is the product of price per nit of output and units sold. 
Statement II Average revenue is the slope of marginal revenue.
Alternatives
(a) Statement I is correct and Statement II is incorrect
(b) Statement II is correct and Statement I is incorrect
(c) Both the statements are correct
(d) Both the statements are incorrect

Assertion-Reasoning MCQs

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question. Assertion (A): During increasing returns to factor, total variable cost increases at a diminishing rate. 
Reason (R): In the first phase of law of variable proportions, variable factors are highly efficient.

Question. Assertion (A): According to law of diminishing returns to factor, marginal physical product of labour decrease but remains positive.
Reason (R): In the second stage of returns to factor, there is over utilisation of fixed factors.

Question. Assertion (A): Average product increases only when marginal product increases.
Reason (R): Rate of change of marginal product is greater than rate of change in average product.

Question. Assertion (A): A rational producer prefer producing in the second stage of law of variable proportion.
Reason (R): In the stage of diminishing returns, AP and MP both falls but AP lies above MP.

Question. Assertion (A): Total variable cost curve is inversely ‘S’ shaped owing to law of variable proportions.
Reason (R): In the initial stage of production, both fixed and variable factors are underutilised.

Case Based MCQs

Read the following case study and Answer the Questions
Farmers in our country are mostly small and marginal. They produce for self-consumption and hardly have any surplus crop to sell in market. These farmers produce with the help of their family members. Also due to limited land holding at times, there are more labour working compared with what is actually required, this leads to disguised unemployment.
Use of primitive tools and techniques further reduces the ability of these families to increase production.

Question. In the above situation, productivity was low due to ………… .
(a) fixity of land
(b) use of primitive tools and techniques
(c) excessive use of variable factor
(d) All of the above

Question. In case of land, the ‘law of returns to factor’ is applicable in ……… .
(a) short-run
(b) medium-run
(c) long-run
(d) None of these

Question. Assertion (A) In case of disguised employment, total physical product becomes constant.
Reason (R) When more people work at a place then required, additional workers does not contribute much to the output.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question. A rational producer should opt to produce in ………… stage.
(a) increasing-returns to scale
(b) diminishing-returns to scale
(c) constant returns to scale
(d) None of the above

Question. In case of disguised unemployment, marginal product of labour is equal to
(a) zero
(b) positive
(c) negative
(d) Either (a) or (c)

Question. Which of the following is a variable factor of production in farming?
(a) Farming land
(b) Labour
(c) Equipments
(d) Both (b) and (c)

Read the following case study and Answer the Questions
Revenue is an important aspect of producer’s behaviour. In indicates a firm’s receipts from sales. In other words, it also indicates the demand for firm’s goods and services. More sales sually indicates more revenue but higher sale depends upon the form of market and clasticity of demand. Firms have better control over price when demand is inelastic.

Question. Average revenue under monopolistic competition is elastic due to
(a) lower price
(b) greater choice
(c) price control
(d) All of these

Question. Incremental revenue is always equal to price under ………. market.
(a) perfect competition
(b) monopoly
(c) monopolistic
(d)None of these

Question. Assertion (A): Total revenue and profits are equal under the market with constant price.
Reason (R): When price becomes constant, additional revenue becomes equal to average revenue.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) 
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

Question. In which form of market, average revenue is inelastic?
(a) Perfect competition
(b) Monopoly
(c) Monopolistic
(d)None of these

Question. ……… curve represent the demand curve of a firm as mentioned in the given paragraph.
(a) Total revenue
(b) Average revenue
(c) Marginal revenue
(d) None of the above

Question. When average revenue is elastic, marginal revenue is
(a) inelastic
(b) also elastic
(c) perfectly elastic
(d) perfectly inelastic

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