AIC SS 2 ECONOMICS REVISION Test
  • 1. The production possibility curve illustrates............
A) The maximum level of production an economy can achieve
B) The average level of production in an economy
C) The minimum level of production an economy can achieve
D) The level of production that is most efficient
  • 2. The law of variable proportion states that.........
A) As more input is added to production, the output will increase at a decreasing rate
B) As more input is added to production, the output will increase at a constant rate
C) As more input is added to production, the output will decrease
D) As more input is added to production, the output will increase at an increasing rate
  • 3. The concept of total productivity refers to........
A) The total output produced by a firm or an economy
B) The average level of productivity in an economy
C) The difference between total revenue and total cost
D) The minimum level of productivity required for firms to stay in business
  • 4. The concept of average productivity refers to...............
A) The total output divided by the total number of units of input
B) The total output multiplied by the total number of units of input
C) The total revenue divided by the total cost
D) The difference between total revenue and total cost
  • 5. The concept of marginal productivity refers to........
A) The difference between total revenue and total cost
B) The total output divided by the total number of units of input
C) The total revenue divided by the total cost
D) The additional output produced by adding one more unit of input
  • 6. Which of the following is NOT an assumption of the production possibility curve?
A) Technology is constant
B) Production is efficient and maximized
C) Resources are fixed in quantity and quality
D) The economy is operating at full employment
  • 7. The law of variable proportion is also known as...........
A) The law of variable marginal returns
B) The law of diminishing marginal returns
C) The law of increasing marginal returns
D) The law of constant marginal returns
  • 8. The concept of total cost includes................
A) The cost of materials and labor needed for production
B) The cost of marketing and advertising
C) All of the above
D) The cost of land and capital equipment
  • 9. The concept of average cost refers to..................
A) The total cost divided by the total number of units produced
B) The cost of producing one additional unit of output
C) The cost of producing the last unit of output
D) The difference between total revenue and total cost
  • 10. The concept of marginal cost refers to............
A) The difference between total revenue and total cost
B) The cost of producing one additional unit of output
C) The total cost divided by the total number of units produced
D) The cost of producing the last unit of output
  • 11. The production possibility curve is concave to the origin because
A) The economy is operating at full employment
B) Resources are fixed in quantity and quality
C) The law of diminishing marginal returns applies to production
D) Technology is constant
  • 12. The law of diminishing marginal returns states that............
A) As more input is added to production, the output will increase at an increasing rate
B) As more input is added to production, the output will remain constant
C) As more input is added to production, the output will increase at a decreasing rate
D) As more input is added to production, the output will increase at a constant rate
  • 13. Which of the following is NOT a factor of production?
A) Money
B) Labor
C) Capital
D) Land
  • 14. The production possibility curve represents.............
A) The historical record of production in an economy
B) The ratio of resources used in production
C) The different combinations of goods an economy can produce with limited resources
D) The trade-offs that occur when an economy produces two goods
  • 15. In economics, the term "production" refers to...........
A) The process of creating goods and services
B) The process of consuming goods and services
C) The process of selling goods and services
D) The process of saving and investing money
  • 16. Which of the following best defines the meaning of cost to an accountant?
A) The amount that needs to be paid to suppliers and employees.
B) The expenses incurred to produce a product or service.
C) The total expenses minus the revenue generated from sales.
D) The monetary value of resources used in production.
  • 17. What is the meaning of cost to an economist?
A) The monetary value of resources used in production.
B) The amount of money spent on advertising and marketing.
C) The amount that needs to be paid to suppliers and employees.
D) The total expenses incurred to produce a product or service.
  • 18. Which of the following is considered a fixed cost (FC)?
A) Energy consumption
B) Rent for a production facility
C) Raw materials
D) Wages of production workers
  • 19. What does Total Cost (TC) represent?
A) The cost of producing one unit of a product
B) The cost of marketing and advertising
C) The sum of fixed cost and variable cost
D) The cost of raw materials only
  • 20. Which of the following is a variable cost (VC)?
A) Rent for a production facility
B) Depreciation of machinery
C) Cost of raw materials
D) Salary of the production manager
  • 21. What is Average Fixed Cost (AFC)?
A) The sum of fixed cost and variable cost
B) The difference between total cost and variable cost
C) The ratio of total fixed cost to the quantity of output
D) The cost of producing one additional unit of a product
  • 22. What does Average Variable Cost (AVC) represent?
A) The sum of fixed cost and variable cost
B) The ratio of total variable cost to the quantity of output
C) The difference between total cost and variable cost
D) The cost of producing one additional unit of a product
  • 23. Which of the following represents Marginal Cost (MC)?
A) The ratio of total fixed cost to the quantity of output
B) The sum of fixed cost and variable cost
C) The difference between total cost and variable cost
D) The cost of producing one additional unit of a product
  • 24. What is the relationship between Marginal Cost (MC) and Average Variable Cost (AVC)?
A) MC and AVC are equal at all levels of output
B) MC is always greater than AVC
C) MC is inversely related to AVC
D) MC is always lesser than AVC
  • 25. Which type of cost is not affected by changes in the level of production?
A) Fixed Cost (FC)
B) Marginal Cost (MC)
C) Variable Cost (VC)
D) Average Fixed Cost (AFC)
  • 26. When Marginal Cost (MC) is below Average Variable Cost (AVC), what happens to AVC?
A) AVC remains constant
B) AVC becomes zero
C) AVC increases
D) AVC decreases
  • 27. Which cost concept represents the cost of producing one additional unit of a product?
A) Average Fixed Cost (AFC)
B) Total Cost (TC)
C) Marginal Cost (MC)
D) Variable Cost (VC)
  • 28. In the short run, which cost concept must be covered for a firm to continue its operations?
A) Fixed Cost (FC)
B) Variable Cost (VC)
C) Total Cost (TC)
D) Average Fixed Cost (ACF)
  • 29. Which of the following is NOT a type of cost concept?
A) Average Fixed Cost (AFC)
B) Marginal Cost (MC)
C) Total Cost (TC)
D) Average Variable Revenue (AVR)
  • 30. What is the formula for calculating Average Fixed Cost (AFC)?
A) AFC = FC / Output
B) AFC = TC / VC
C) AFC = VC / Output
D) AFC = TC / FC
  • 31. Which of the following options best defines revenue?
A) The total amount of money earned from selling goods and services
B) The amount of money paid to suppliers and workers
C) The profit earned from a business venture
D) The cost incurred to produce goods and services
  • 32. When total revenue exceeds total cost, a business makes
A) Break-even
B) Investment
C) Loss
D) Profit
  • 33. Which of the following is an example of a fixed cost for a business?
A) Advertising expenses
B) Wages for temporary workers
C) Raw materials
D) Rent for a factory
  • 34. Which of the following is an example of variable costs for a business?
A) Insurance premiums
B) Electricity bills
C) Depreciation on machinery
D) Loan repayments
  • 35. The formula for calculating total revenue is..........
A) Number of units sold multiplied by price per unit
B) Number of units sold divided by price per unit
C) Total cost divided by profit
D) Total cost minus profit
  • 36. Which of the following is an example of average revenue?
A) The total revenue earned from all sales
B) The revenue earned from each unit sold
C) The revenue earned from variable costs
D) The revenue earned from fixed costs only
  • 37. Marginal revenue is calculated by............
A) Comparing total revenue to average revenue
B) Multiplying total revenue by price per unit
C) Subtracting total cost from total revenue
D) Dividing change in total revenue by change in quantity sold
  • 38. When marginal revenue is greater than marginal cost, a business should.........
A) Increase production
B) Maintain the current level of production
C) Decrease production
D) Raise prices
  • 39. When average revenue is equal to average cost, a business
A) Incurs a loss
B) Expands its product range
C) Breaks even
D) Makes a profit
  • 40. Which of the following best explains the concept of total revenue?
A) The revenue earned from all sales of a product
B) The revenue earned from fixed costs only
C) The revenue earned from a single unit of a product
D) The revenue earned from variable costs only
  • 41. The concept of revenue is important for businesses because it helps to determine................
A) The number of workers employed
B) The price of raw materials
C) The number of units produced
D) The amount of profit earned
  • 42. Which of the following is an example of a non-revenue generating activity for a business?
A) Training programs for employees
B) Research and development of new products
C) Marketing and advertising campaigns
D) Paying salaries to workers
  • 43. In the short run, a business may experience diminishing marginal revenue due to...............
A) Higher fixed costs
B) Increased competition
C) Decreased consumer demand
D) Rising variable costs
  • 44. A business's revenue can be maximized by setting the price at...............
A) The level that covers only fixed costs
B) The level that covers total costs
C) The level that covers only variable costs
D) The most competitive price in the market
  • 45. Which of the following is an example of revenue from a service industry?
A) Interest earned from investments
B) Fees charged by a law firm
C) Rental income from real estate
D) Sales of agricultural produce
  • 46. What is an economic system?
A) The physical infrastructure of a country
B) The political system of a country
C) The educational system of a country
D) The organization of production, distribution, and consumption of goods and services in a society
  • 47. Which economic system provides the least incentive for innovation and entrepreneurship?
A) Traditional economy
B) Command economy
C) Mixed economy
D) Market economy
  • 48. What is the primary drawback of a traditional economy?
A) Inequality
B) Lack of stability
C) Slow economic growth
D) Overreliance on technology
  • 49. Which of the following is a feature of a market economy?
A) Extensive government control over production and distribution
B) Limited role of private enterprise
C) Competition and consumer choice
D) Price determination by central planners
  • 50. In a mixed economy, who typically owns the means of production?
A) Local communities
B) International organizations
C) Private individuals and businesses
D) Government
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