MCQ Chapter 3 Production and Costs Class 12 Economics

Please refer to Production and Costs MCQ Questions Class 12 Economics below. These MCQ questions for Class 12 Economics with answers have been designed as per the latest NCERT, CBSE books, and syllabus issued for the current academic year. These objective questions for Production and Costs will help you to prepare for the exams and get more marks.

Production and Costs MCQ Questions Class 12 Economics

Please see solved MCQ Questions for Production and Costs in Class 12 Economics. All questions and answers have been prepared by expert faculty of standard 12 based on the latest examination guidelines.

MCQ Questions Class 12 Economics Production and Costs

Question. The basic reason of operating the Law of Diminishing Returns is:
(a) Scarcity of Factors
(b) Imperfect Substitution between Factors
(c) Both (a) and (b)
(d) None of the above

Question. Long-run production function is related to:
(a) Law of Demand
(b) Law of Increasing Returns
(c) Laws of Returns to Scale
(d) Elasticity of Demand

Question. Law of variable proportion explains three stages of production. In the first stage of production:
(a) Both MP and AP rise
(b) MP rises
(c) AP Falls
(d) MP is zero

Question. Production function is expressed as:
(a) Q_x = Px
(b) Q_x = f(A, B, C, D)
(c) Q_x= D_x
(d) None of these

Question. The cycle which increases first and after being constant starts to reduce is called :
(a) APP
(b) MPP
(c) TPP
(d) All of these

Question. Law of variable proportion is related to :
(a) Both short-run and long run
(b) Long-run
(c) Short-run
(d) Very Long-run

Question. If all the factors of production are increased by same proportion and as a result output increases by a greater proportion than it is called :
(a) Constant returns to scale
(b) Decreasing returns to scale
(d) All of these
(d) None of these

Question. Which of the following is not fixed cost ?
(a) Insurance Premium
(b) Interest
(c) Cost of Raw Material
(d) Rent of the Factory

Question. Changes in production quantity affect:
(a) Both Fixed and Variable Cost
(b) Only Variable Cost
(c) Only Fixed Cost
(d) None of the above

Question. The alternative name of opportunity cost is:
(a) Economic Cost
(b) Equilibrium Price
(c) Marginal Cost
(d) Average Cost

Question. Which statement of the following is true ?
(a) AC=TFC – TVC
(b) AC = AFC + TVC
(c) AC=TFC + AVC
(d) AC = AFC + AVC

Question. The shape of average cost curve is :
(a) U-shaped
(b) Reactangular Hyperbola shaped
(c) Line parallel to x-axis
(d) None of these

Question. Which of the following is correct ?
(a) TVC = TC – TFC
(b) TC = TVC-TFC
(c) TFC = TVC + TC
(d) TC = TVC x TFC

Question. With increase in output, the difference between total cost and total variable cost:
(a) Decreases
(b) Increases
(c) Remains Constant
(d) None of the above

Question. Following figure shows:

(a) Total Fixed Cost
(b) Total Variable Cost
(c) Total Cost
(d) None of these

Question . If the short-run average variable costs of production for a firm are rising, then this indicates that:
(a) average total costs are at a maximum.
(b) marginal costs are above average variable costs. 
(c) average fixed costs are constant.
(d) average variable costs are below average fixed costs.

Question. Which is not a quantitative method of credit control?
(a) Bank Rate
(b) Moral Suasion
(c) Open Market Operations
(d) Change in CRR

Question . ______ shows the overall output generated at a given level of input:
(a) Cost function
(b) Production function
(c) Iso cost
(d) Marginal rate of technical substitution

Question . The marginal product curve is above the average product curve when the average product is :
(a) Increasing
(b) Decreasing
(c) Constant
(d) None

Question. When was the minimum reserve system started in India?
(a) 1947
(b) 1948
(c) 1951
(d) 1957

Question. Indian Monetary System is based on ________
(a) Paper Standard
(b) Metallic Standard
(c) Gold Standard
(d) Credit Money Standard

Question. The ratio of total deposits that a commercial bank has to keep with RBI is called:
(a) Statutory liquidity ratio
(b) Deposit ratio
(c) Cash reserve ratio
(d) Legal reserve ratio

Question. Which one is the difficulty of the Barter System?
(a) Lack of Double Coincidence
(b) Difficulty of Division of the Goods
(c) Lack of General Acceptable Measure of Value
(d) All the above

Question. Which one is included in the primary function of money?
(a) Medium of Exchange
(b) Measure of Value
(c) Both (a) and (b)
(d) Store of Value

Question. The functions of money include:
(a) Value determination
(b) Store of value
(c) Means of exchange
(d) All of these

Question. During IInd stage of law of Diminishing returns:
(a) MP and TP is maximum
(b) MP and AP are decreasing
(c) AP is negative
(d) TP is negative

Question. Institution that accepts deposits for lending purpose is known as __________
(a) Commercial Bank
(b) Central Bank
(c) Government
(d) Public

Question. The law of diminishing returns only applies in cases where:
(a) there is increasing scarcity of factors of production.
(b) the price of extra units of a factor is increasing.
(c) capital is a variable input
(d) there is at least one fixed factor of production.

Question. Which function is the Secondary Function of Commercial Banks?
(a) Agency Function
(b) General Utility Function
(c) Social Function
(d) All of these

Question. The full form of ATM is:
(a) Any Time Money
(b) All Time Money
(c) Automated Teller Machine
(d) Both (a) and (b)

Question. RBI announced the guidelines to issue licenses to new banks of the private sector on:
(a) January 22, 1993
(b) March 15, 1995
(c) April 1, 1999
(d) None of these

Question. Law of diminishing returns to applicable in: 
(a) Manufacturing industry
(b) Agriculture
(c) Neither (a) nor (b)
(d) Any economic activity at a point of time.

Question. How is Total Physical Product derived from Marginal Physical Product?
(a) Cumulative subtraction 
(b) Cumulative addition
(c) Cumulative product
(d) Cumulative Division

Question. The major objectives of monetary policy is/are:
(a) Increase in output and employment
(b) Stability in the foreign exchange rate
(c) Price stability
(d) All of these

Question. Narasimham Committee is related to what:
(a) Improvement in Taxation
(b) Improvement in Banking
(c) Improvement in Agriculture
(d) Improvement in Infrastructure

Question. The meaning of money supply is:
(a) Money deposits in the bank
(b) Cash available with public
(c) Savings in the post office
(d) All of the above

Question. Implicit costs are:
(a) equal to total fixed costs.
(b) comprised entirely of variable costs.
(c) “payments” for self-employed resources.
(d) always greater in the short run than in the long run.

Question. What is Production in Economics:-
(a) Creation / Addition of Utility
(b) Production of food grains
(c) Creation of services
(d) Manufacturing of goods

Question. Which type of currency is issued by Central Bank?
(a) Currency
(b) Credit Money
(c) Coins
(d) All of these

Question. Which of the following issue paper currency in the country?
(a) Commercial Bank
(b) Central Bank
(c) World Bank
(d) Industrial Bank

Question. Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which is true?
(a) The firm will earn accounting and economic profits.
(b) The firm will face accounting and economic losses.
(c) The firm will face an accounting loss, but earn economic profits.
(d) The firm may earn accounting profits, but will face economic losses

Question. Commercial banks:
(a) Issue currency notes
(b) Accepts deposits from customers
(c) Provide loans to customers
(d) Only (b) and (c)

Question. Diminishing marginal returns implies:
(a) Decreasing average variable costs
(b) Decreasing marginal costs
(c) Increasing marginal costs
(d) Decreasing average fixed costs

Question. Banking Ombudsman Scheme was announced in the year:
(a) 1990
(b) 1995
(c) 1997
(d) 2000

Question. Which is associated with reforms in the banking sector?
(a) Year 1991
(b) Narsimham Committee
(c) Y.V. Reddy Committee
(d) Only (a) and (b)

Question. When a firm doubles its inputs and finds that its output has more than doubled, this is known as:
(a) economies of scale.
(b) constant returns to scale.
(c) diseconomies of scale.
(d) a violation of the law of diminishing returns.

Question. The shape of the Total Physical Product short run is
(a) Inverse U-Shaped
(b) U-Shaped
(c) Hyperbola
(d) V-Shaped

Question. Which of the following is the credit money?
(a) Cheque and draft
(b) Promissory note
(c) Exchange note
(d) All of these

Question. Variable costs are:
A) sunk costs.
(b) multiplied by fixed costs.
(c) costs that change with the level of production.
(d) defined as the change in total cost resulting from the production of an additional unit of output.

Question. The primary function of Commercial Bank is?
(a) Accepting Deposits
(b) Advancing Loans
(c) Credit Creation
(d) All of these

Question. Economies and diseconomies of scale explain why the:
(a) short-run average fixed cost curve declines so long as output increases.
(c) marginal cost curve must intersect the minimum point of the firm’s average total cost curve.
(b) long-run average total cost curve is typically U-shaped.
(d) short-run average variable cost curve is U-shaped.

Question. Giving permission to withdraw money by an amount more than deposited to is known as _________
(a) Advance
(b) Overdraft
(c) Loan
(d) None of these

Fill in the blanks:

Question. Returns to scale is related to ……………
Answer : Long term
Question. Increase in income from a unit of production is called ……………
Answer : Marginal cost
Question. Law of supply shows …………… relation between price and supply.
Answer : Direct

State true or false:

Question. Law of decreasing returns to scale arises due to Non-divisibility.
Answer : False
Question. In case of perfect competition, a firm attains maximum satisfaction when MC curve cut MR curve.
Answer : False
Question. The supply of perishable goods is inelastic.
Answer : True

Match the following:

‘A”	‘B’
1. Causes for the operation of the law of diminishing returns	(a) Firms’s equilibrium
2. Long term process	(b) Imperfect substitute of factors of production
3. Marginal Revenue = Average Revenue.	(c) Returns to scale
4. Elasticity of supply	(d) es = 1.
5. Elastic supply	(e) Proportionate change in supply proportionate change in price.

Answer :

‘A”	‘B’
1. Causes for the operation of the law of diminishing returns	(b) Imperfect substitute of factors of production
2. Long term process	(c) Returns to scale
3. Marginal Revenue = Average Revenue.	(a) Firms’s equilibrium
4. Elasticity of supply	(e) Proportionate change in supply proportionate change in price.
5. Elastic supply	(d) es = 1.