Micro

Production & Costs

Medium

Choose the correct statements from the options given below in terms of the shapes of the short run cost curves.

(A) Average fixed cost curve is a rectangular hyperbola.

(B) Total fixed cost is horizontal straight line.

(C) Average variable cost is upward sloping.

(D) Marginal cost is U shaped.

Choose the correct answer from the options given below:

(A), (C) and (D) only

(A), (B) and (D) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 2

Option 1 -> Includes statement (C) which is incorrect as AVC is U-shaped, not simply upward sloping.

Option 2 -> Correctly identifies (A), (B), and (D). AFC is a rectangular hyperbola, TFC is horizontal, and MC is U-shaped.

Option 3 -> Includes statement (C) which incorrectly describes AVC as only upward sloping when it's actually U-shaped.

Option 4 -> Excludes statement (A) which is correct, and includes statement (C) which is incorrect.

Hence, Option 2: (A), (B) and (D) only -> Statement (A) is correct because AFC = TFC/Q, and since TFC is constant, AFC continuously falls forming a rectangular hyperbola. Statement (B) is correct as TFC remains constant at all output levels, forming a horizontal line. Statement (D) is correct as MC follows a U-shape due to the law of variable proportions - initially falling due to increasing marginal returns, then rising due to diminishing marginal returns. Statement (C) is incorrect because AVC is U-shaped (first decreasing, then increasing), not merely upward sloping throughout. -> correct

2025: 3 June Shift 1

Match List-I with List-II

List-I	List-II
(A) Total Cost	(I) Change in total cost when an additional unit of output is produced.
(B) Marginal Cost	(II) Vertical summation of Average Fixed Cost (AFC) and Average Variable Cost (AVC) curves.
(C) Fixed Cost	(III) Explicit Costs + Implicit Costs.
(D) Short period Average Cost (AC) Curve	(IV) Does not change with increase or decrease in output.

Choose the correct answer from the options given below:

2026: 31 May Shift 1

Input	Output	Marginal productivity of factor
$10\ L_1$	$20\ Q_1$	$MP_L = ?$
$12\ L_2$	$25\ Q_2$
$8\ K_3$	$16\ Q_3$	$MP_K = ?$
$10\ K_4$	$20\ Q_4$

Where labour input $L_1$ and $L_2$ are related to output $Q_1$ and $Q_2$ respectively

Capital input $K_3$ and $K_4$ are related to output $Q_3$ and $Q_4$ respectively

Find the values of $MP_L$ and $MP_K$ .

2025: 3 June Shift 1

Extension of supply occurs due to change in _________

2025: 22 May Shift 1

For the firm to continue to produce, in the long run, price must be greater than the average cost (p > AC) and in the short run, price must be greater than the ......

2026: 19 May Shift 2

In the short run, when a fixed input is combined with increasing variable inputs, the following changes in Average Product (AP) and Marginal Product (MP) are witnessed. Select the correct order of such change starting with the first unit employment of variable input.

A. AP and MP both decrease and AP > MP

B. AP and MP both increase and AP < MP

C. AP intersects MP and after that AP > MP

D. AP = MP, for the first level of output

Choose the correct sequence from the options given below:

2026: 13 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Average product of labour	(I) TVC/q
(B) Marginal product of labour	(II) TPL/L
(C) Average variable cost(AVC)	(III) Δ TPL/ΔL
(D) Average Fixed Cost(AFC)	(IV) TFC/q

Choose the correct answer from the options given below:

Solution

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