Students of class 12 Economics should refer to MCQ Questions Class 12 Economics Production and Costs with answers provided here which is an important chapter in Class 12 Economics NCERT textbook. These MCQ for Class 12 Economics with Answers have been prepared based on the latest CBSE and NCERT syllabus and examination guidelines for Class 12 Economics. The following MCQs can help you to practice and get better marks in the upcoming class 12 Economics examination

Chapter 3 Production and Costs MCQ with Answers Class 12 Economics

MCQ Questions Class 12 Economics Production and Costs provided below have been prepared by expert teachers of grade 12. These objective questions with solutions are expected to come in the upcoming Standard 12 examinations. Learn the below provided MCQ questions to get better marks in examinations.

Question. In production function, production is a function of:
(a) Price
(b) Factors of Production
(c) Total Expenditure
(d) None of these

Question. Which of the following explains the short-run production function ?
(a) Law of Demand
(b) Law of Variable Proportion
(c) Returns to Scale
(d) Elasticity of Demand

Question. In which stage of production a rational producer likes to operate in shot-run production ?
(a) First Stage
(b) Second Stage
(c) Third Stage
(d) None of these

Question. At which time all the factors of production may be changed ?
(a) Short run
(b) Long run
(c) Very Long run
(d) All the three

Question. Which factors among following we find in short-run production process ?
(a) Fixed Factors
(b) Variable Factors
(c) Both (a) and (b)
(d) None of these

Question. Which of the following is a saurce of production ?
(a) Land
(b) Labour
(c) Capital
(d) All of these

Question. An active factor of production is:
(a) Capital
(b) Labour
(c) Land
(d) None of these

Question. Which of the following is included in money cost ?
(a) Normal Profit
(b) Explicit Cost
(c) Implicit Cost
(d) All of these

Question. With the increase in production the difference between total cost and total fixed cost:
(a) Remains Constant
(b) Increases
(c) Decreases
(d) Both Increases or Decreases

Question. What happens when production is shut down ?
(a) Fixed Cost Increases
(b) Variable Costs Decline
(c) Variable Costs become zero
(d) Fixed Costs become zero

Question. When average cost is decreasing what status marginal cost has as compared to average cost ?
(a) MC > AC
(b) MC = AC
(c) MC ≤ AC
(d) MC ≠ AC

Question. What is an opportunity cost ?
(a) The alternative foregon
(b) The opportunity lost
(c) Transfer earnings
(d) All of these

Question. The average fixed cost at 5 units of output is Rs. 20. Average variable cost at 5 units of output is Rs. 40. Average cost of producing 5 units is:
(a) Rs. 20
(b) Rs. 40
(c) Rs.56
(d) Rs.60

Question. Average variable costs can be defined as:
(a) TVC x Q
(b) TVC + Q
(c) TVC-Q
(d) TVC ÷ Q

Question. Which factors are used in short-run production process ?
(a) Fixed Factors
(b) Variable Factors
(c) Both (a) and (b)
(d) None of the above

Question. When TP is falling, then MP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. The _______ distance between TVC and TC is ________.
(a) Vertical, TFC
(b) Horizontal, TFC
(c) Horizontal, AFC
(d) Vertical, AFC

Question. AVC is defined as:
(a) Variable cost per unit of output produced
(b) Cost of one unit of output produced
(c) Additional cost of one unit of output produced
(d) None of the above

Question. When TP is at its point of inflexion, the MP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. When AP = MP, AP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. How many costs exist in the short-run?
(a) 1
(b) 3
(c) 2
(d) 7

Question. Suppose total revenue is rising at a constant rate as more and more units of a commodity are sold, marginal revenue would be: 
(a) Greater than average revenue
(b) Equal to average revenue
(c) Less than average revenue
(d) Rising

Question. When TP is maximum, MP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. Law of Variable Proportions holds when:
(a) State of technology is same
(b) All units of variable factor are homogeneous
(c) There is at least one fixed factor
(d) All of the above

Question. MC curve is ________ shaped.
(a) L-shaped
(b) Straight line
(c) U-shaped
(d) Inverse S-shaped

Question. Reason for the U-shape of MC curve is:
(a) Law of Variable Proportions
(b) Returns to Scale
(c) Law of diminishing cost
(d) Law of increasing cost

Question. Stage II of Law of Variable Proportions is called:
(a) Diminishing returns
(b) Decreasing returns
(c) Falling returns
(d) Negative returns

Question. TC curve is ___________ shaped starting from _________ .
(a) Inverse–S, origin
(b) Inverse–S, total fixed cost level
(c) Straight line, average fixed cost level
(d) Straight line, total fixed cost level

Question. Production function means:
(a) Physical relationship between inputs used and output
(b) Technical relationship between inputs used and output
(c) Financial relationship between inputs used and output
(d) Both physical and technical relationship between inputs used and output

Question. There is a range when AC is falling and __________.
(a) MC is rising
(b) TC is rising
(c) AVC is constant
(d) None of the above

Question. Short-run production function means:
(a) At least one factor is in fixed supply
(b) Two factors are in fixed supply
(c) All factors are in fixed supply
(d) One factor is in variable supply

Question. When AC = MC, AC is ________.
(a) Minimum
(b) Falling
(c) Rising
(d) Maximum

Question. Total cost at zero level of output will be = ________?
(a) TFC
(b) TVC
(c) AC
(d) AFC

Question. When TP is falling, then MP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. The _______ distance between TVC and TC is ________.
(a) Vertical, TFC
(b) Horizontal, TFC
(c) Horizontal, AFC
(d) Vertical, AFC

Question. AVC is defined as:
(a) Variable cost per unit of output produced
(b) Cost of one unit of output produced
(c) Additional cost of one unit of output produced
(d) None of the above

Question. When TP is at its point of inflexion, the MP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. When AP = MP, AP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. How many costs exist in the short-run?
(a) 1
(b) 3
(c) 2
(d) 7

Question. Suppose total revenue is rising at a constant rate as more and more units of a commodity are sold, marginal revenue would be: 
(a) Greater than average revenue
(b) Equal to average revenue
(c) Less than average revenue
(d) Rising

Question. When TP is maximum, MP is:
(a) Falling
(b) Negative
(c) Zero
(d) Maximum

Question. Law of Variable Proportions holds when:
(a) State of technology is same
(b) All units of variable factor are homogeneous
(c) There is at least one fixed factor
(d) All of the above

Question. MC curve is ________ shaped.
(a) L-shaped
(b) Straight line
(c) U-shaped
(d) Inverse S-shaped

Question. Reason for the U-shape of MC curve is:
(a) Law of Variable Proportions
(b) Returns to Scale
(c) Law of diminishing cost
(d) Law of increasing cost

Question. Stage II of Law of Variable Proportions is called:
(a) Diminishing returns
(b) Decreasing returns
(c) Falling returns
(d) Negative returns

Question. TC curve is ___________ shaped starting from _________ .
(a) Inverse–S, origin
(b) Inverse–S, total fixed cost level
(c) Straight line, average fixed cost level
(d) Straight line, total fixed cost level

Question. Production function means:
(a) Physical relationship between inputs used and output
(b) Technical relationship between inputs used and output
(c) Financial relationship between inputs used and output
(d) Both physical and technical relationship between inputs used and output

Question. There is a range when AC is falling and __________.
(a) MC is rising
(b) TC is rising
(c) AVC is constant
(d) None of the above

Question. Short-run production function means:
(a) At least one factor is in fixed supply
(b) Two factors are in fixed supply
(c) All factors are in fixed supply
(d) One factor is in variable supply

Question. When AC = MC, AC is ________.
(a) Minimum
(b) Falling
(c) Rising
(d) Maximum

Question. Total cost at zero level of output will be = ________?
(a) TFC
(b) TVC
(c) AC
(d) AFC

Fill in the blanks:

Question. Short-term production function is known as ……………
Answer : Law of variable proportion
Question. Cost incurred in per unit production is ……………
Answer : Average cost
Question. A producer is in the state of equilibrium when he earns ……………
Answer : Profit
Question. The elasticity of supply for milk and related good is ……………
Answer : Elastic.

State true or false:

Question. Rent theory of Ricardo is based on the law of Diminishing returns.
Answer : True
Question. Fixed cost is also known as supplementary cost.
Answer : True
Question. There is inverse relation between price and supply.
Answer : False
Question. There are four laws of production.
Answer : False.

We hope the above multiple choice questions for Class 12 Economics for Chapter 3 Production and Costs provided above with answers based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS are really useful for you. Production and Costs is an important chapter in Class 12 as it provides very strong understanding about this topic. Students should go through the answers provided for the MCQs after they have themselves solved the questions. All MCQs have been provided with four options for the students to solve. These questions are really useful for benefit of class 12 students. Please go through these and let us know if you have any feedback in the comments section.