Theory of Production and Cost
20 Practice MCQs available for CA Foundation
Paper
Paper 4: Business Economics
Exam Weightage
10%
Key Topics
Function, Cost Concepts (Short/Long Run)
This chapter explores how firms produce goods and services. It covers Production Functions, the Laws of Returns (Increasing, Constant, Diminishing), and all cost concepts including Total Cost, Average Cost, Marginal Cost, Fixed Cost, and Variable Cost. Understanding why the AC and MC curves are U-shaped is crucial for exam success.
Exam Strategy Tip
The relationship between MC and AC curves is a favorite examiner topic. Remember: MC cuts AC at its minimum point. Also focus on the difference between Short Run and Long Run cost curves.
Comparison Tables
All 20 Questions
Which of the following is considered production in Economics?
When average product is maximum, marginal product is equal to:
Which of the following is a variable cost?
Production is a function of:
Law of variable proportion is valid when:
The law of returns to scale is a _____ concept.
Average Fixed Cost (AFC) curve is:
Which of the following is not a characteristic of land?
Opportunity cost is:
Which cost increases continuously with the increase in production?
Marginal cost is defined as:
Fixed cost is known as:
The shape of TFC curve is:
Explicit costs are also called:
External economies of scale are obtained by:
Innovation theory of profit was given by:
Isoquants are also known as:
In the short run, if output is zero, total cost is equal to:
Economies of scale arise due to:
U-shaped average cost curve is based on:
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