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