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AIC SS 2 ECONOMICS REVISION Test
Contributed by: College
  • 1. The production possibility curve illustrates............
A) The minimum level of production an economy can achieve
B) The maximum level of production an economy can achieve
C) The average level of production in an economy
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 average level of productivity in an economy
B) The difference between total revenue and total cost
C) The minimum level of productivity required for firms to stay in business
D) The total output produced by a firm or an economy
  • 4. The concept of average productivity refers to...............
A) The total revenue divided by the total cost
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 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 diminishing marginal returns
C) The law of increasing marginal returns
D) The law of variable marginal returns
  • 8. The concept of total cost includes................
A) All of the above
B) The cost of marketing and advertising
C) The cost of land and capital equipment
D) The cost of materials and labor needed for production
  • 9. The concept of average cost refers to..................
A) The total cost divided by the total number of units produced
B) The difference between total revenue and total cost
C) The cost of producing the last unit of output
D) The cost of producing one additional unit of output
  • 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) Technology is constant
C) Resources are fixed in quantity and quality
D) The law of diminishing marginal returns applies to production
  • 12. The law of diminishing marginal returns states that............
A) As more input is added to production, the output will remain constant
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 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) Capital
B) Land
C) Money
D) Labor
  • 14. The production possibility curve represents.............
A) The historical record of production in an economy
B) The different combinations of goods an economy can produce with limited resources
C) The ratio of resources used in production
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 total expenses minus the revenue generated from sales.
B) The monetary value of resources used in production.
C) The expenses incurred to produce a product or service.
D) The amount that needs to be paid to suppliers and employees.
  • 17. What is the meaning of cost to an economist?
A) The total expenses incurred to produce a product or service.
B) The amount of money spent on advertising and marketing.
C) The amount that needs to be paid to suppliers and employees.
D) The monetary value of resources used in production.
  • 18. Which of the following is considered a fixed cost (FC)?
A) Wages of production workers
B) Energy consumption
C) Rent for a production facility
D) Raw materials
  • 19. What does Total Cost (TC) represent?
A) The cost of marketing and advertising
B) The sum of fixed cost and variable cost
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 sum of fixed 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 difference between total cost and variable cost
  • 22. What does Average Variable Cost (AVC) represent?
A) The difference between total cost and variable cost
B) The sum of fixed cost and variable cost
C) The cost of producing one additional unit of a product
D) The ratio of total variable cost to the quantity of output
  • 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 greater than AVC
B) MC is inversely related to AVC
C) MC and AVC are equal at all levels of output
D) MC is always lesser than AVC
  • 25. Which type of cost is not affected by changes in the level of production?
A) Marginal Cost (MC)
B) Fixed Cost (FC)
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 increases
B) AVC becomes zero
C) AVC decreases
D) AVC remains constant
  • 27. Which cost concept represents the cost of producing one additional unit of a product?
A) Variable Cost (VC)
B) Marginal Cost (MC)
C) Total Cost (TC)
D) Average Fixed Cost (AFC)
  • 28. In the short run, which cost concept must be covered for a firm to continue its operations?
A) Average Fixed Cost (ACF)
B) Total Cost (TC)
C) Variable Cost (VC)
D) Fixed Cost (FC)
  • 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 = TC / VC
B) AFC = VC / Output
C) AFC = TC / FC
D) AFC = FC / Output
  • 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 cost incurred to produce goods and services
D) The amount of money paid to suppliers and workers
  • 32. When total revenue exceeds total cost, a business makes
A) Break-even
B) Profit
C) Loss
D) Investment
  • 33. Which of the following is an example of a fixed cost for a business?
A) Advertising expenses
B) Raw materials
C) Wages for temporary workers
D) Rent for a factory
  • 34. Which of the following is an example of variable costs for a business?
A) Depreciation on machinery
B) Electricity bills
C) Insurance premiums
D) Loan repayments
  • 35. The formula for calculating total revenue is..........
A) Number of units sold multiplied by price per unit
B) Total cost minus profit
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 total revenue earned from all sales
C) The revenue earned from fixed costs only
D) The revenue earned from each unit sold
  • 37. Marginal revenue is calculated by............
A) Multiplying total revenue by price per unit
B) Comparing total revenue to average revenue
C) Dividing change in total revenue by change in quantity sold
D) Subtracting total cost from total revenue
  • 38. When marginal revenue is greater than marginal cost, a business should.........
A) Decrease production
B) Maintain the current level of production
C) Increase production
D) Raise prices
  • 39. When average revenue is equal to average cost, a business
A) Breaks even
B) Makes a profit
C) Expands its product range
D) Incurs a loss
  • 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 a single unit of a product
C) The revenue earned from variable costs only
D) The revenue earned from fixed 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 amount of profit earned
D) The number of units produced
  • 42. Which of the following is an example of a non-revenue generating activity for a business?
A) Research and development of new products
B) Paying salaries to workers
C) Marketing and advertising campaigns
D) Training programs for employees
  • 43. In the short run, a business may experience diminishing marginal revenue due to...............
A) Rising variable costs
B) Higher fixed costs
C) Decreased consumer demand
D) Increased competition
  • 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 most competitive price in the market
D) The level that covers only variable costs
  • 45. Which of the following is an example of revenue from a service industry?
A) Fees charged by a law firm
B) Interest earned from investments
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 educational system of a country
C) The physical infrastructure of a country
D) The political system of a country
  • 47. Which economic system provides the least incentive for innovation and entrepreneurship?
A) Traditional economy
B) Market economy
C) Mixed economy
D) Command economy
  • 48. What is the primary drawback of a traditional economy?
A) Overreliance on technology
B) Lack of stability
C) Slow economic growth
D) Inequality
  • 49. Which of the following is a feature of a market economy?
A) Limited role of private enterprise
B) Price determination by central planners
C) Competition and consumer choice
D) Extensive government control over production and distribution
  • 50. In a mixed economy, who typically owns the means of production?
A) Government
B) International organizations
C) Local communities
D) Private individuals and businesses
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