Please refer to Chapter 3 Production and Costs MCQ Class 12 Economics with answers below. These multiple-choice questions have been prepared based on the latest NCERT book for Class 12 Economics. Students should refer to MCQ Questions for Class 12 Economics with Answers to score more marks in Grade 12 Economics exams. Students should read the chapter Production and Costs and then attempt the following objective questions.

MCQ Questions Class 12 Economics Chapter 3 Production and Costs

Production and Costs MCQ Class 12 Economics provided below covers all important topics given in this chapter. These MCQs will help you to properly prepare for exams.

Question. In which market AR = MR ?
A. Monopoly
B. Monopolistic Competition
C. Both A. and B.
D. Perfect Competition

Question. To which market, following figure belongs ?
A. Perfect Competition
B. Monopoly
C. Monopolistic Competition
D. None of the above

Question. In perfect competition, which of the following remains constant ?
A. AR
B. MR
C. Both AR and MR
D. None of the both

Question. When 5 units of a goods are sold, total revenue is Rs. 100. When 6 units are sold, marginal revenue is Rs. 8. At what price are 6 units sold ?
A. Rs. 28 per unit
B. Rs. 20 per unit
C. Rs. 18 per unit
D. Rs. 12 per unit

Question. Which of the following is a true statement ?
A. AR indicates price
B. AR Curve and Demand Curve are the same
C. Both A. and B.
D. None of the above

Question. In final equilibrium of firm:
A. MC cuts MR from above
B. MC cuts MR from below
C. Both A. and B. are
D. None of the above is true

Question. Which is a method of producer’s equilibrium ?
A. TR and TC Method
B. MR and MC Method
C. Both A. and B.
D. None of the above

Question. On which assumption, the law of supply depends ?
A. There should be no change in income levels of buyers and sellers in the market.
B. Prices of factors of production remain stable
C. Technological level remains constant
D. All the above

Question. The reason of decrease in supply is:
A. Increase in Production Cost
B. Increase in Price of Substitutes
C. Fall in number of Firms in the Industry
D. All the above

Question. The quantity of a goods which the seller is ready to sell in the market at fixed price and time is called ?
A. Supply
B. Demand
C. Elasticity of supply
D. Elasticity of Demand

Question. Determinating factor of supply of goods is:
A. Price of Goods
B. Price of Related Goods
C. Price of Factor of Production
D. All the above

Question. Which of the following function shows the laws of supply ?
A. S = f(P)
B. S = f(a/p)
C. S = f(Q)
D. None of the above

Question. Which of the following is correct ?
A. Perfectly Elastic Supply e_s= ∞
B. High Elastic Supply e_s> 1
C. Perfectly Inelastic Supply e_s= 0
D. All the above

Question. If the price of goods rises by 60% but supply increases by only 5%, the supply of goods will be:
A. Highly Elastic
B. Elastic
C. Inelastic
D. Perfectly Inelastic

Question. When supply increases more with a result of small increase in price, the nature of supply will be :
A. Elastic
B. Inelastic
C. Perfectly Elastic
D. Perfectly Inelastic

Question. If the price of the goods rises by 60% and supply increases by only 5%, the supply of goods will be :
A. Highly Elastic
B. Elastic
C. Inelastic
D. Perfectly Inelastic

Question. There are factors of productions:
A. Two
B. Three
C. Four
D. Five

Question. Supply falls on the same price when:
A. Where there is decrease in supply
B. When there is contraction in supply
C. When supply increases
D. When there is expansion in supply.

Question. In the short-run following factors are included in the process of production:
A. Fixed factors
B. Variable factors
C. Both A. and B.
D. None of these.

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. When demand is perfectly inelastic, an increase in price will result in           
A. A decrease in total revenue
B. An increase in total revenue
C. No change in total revenue
D. A decrease in quantity demanded

Question. If quantity demanded is completely unresponsive to changes in price, demand is               
A. Inelastic
B. Unit elastic
C. Elastic
D. Perfectly inelastic

Question. Which of the following is NOT a feature of iso-product curve? Iso-product curves         
A. Are downward sloping to the right
B. Show different input combination producing the same output
C. Intersect each other
D. Are convex to the origin

Question. Demand for a commodity refers to a           
A. Desire for the commodity
B. Need for the commodity
C. Quantity demanded of that commodity
D. Quantity of the commodity demanded at a certain price during any particular period of time

Question. Which among the following statement is INCORRECT?               
A. Welfare economics is based on value judgements
B. Welfare economics is also called ‘economics with a heart’
C. Welfare economics focuses on questions about equity as well as efficiency
D. The founder of Welfare economics was Alfred Marshall

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. Price of a product is determined in a free market by             
A. Demand for the product
B. Supply of the product
C. Both demand and supply 
D.The government 

Question.___ is defined as the output per unit of variable input.
A. Total Product (TP)
B. Average Product
C. Marginal Product
D. None of the above

Question. Normally a demand curve will have the shape           
A. Horizontal
B. Vertical
C. Downward sloping
D. Upward sloping

Question. The alternative name of opportunity cost is:
A. Economic Cost
B. Equilibrium Price
C. Marginal Cost
D. Average Cost

Question. In market equilibrium, supply is vertical line. The downward sloping demand curve shifts to the right. Then             
A. Price will fall
B. Price remains same
C. Price will rise
D. Quantity rises

Question. Some economists refer to iso-product curves as           
A. Engels curve
B. Production indifference curve
C. Budget line
D. Ridge line

Question. Who is the ‘lender of the last resort’ in the banking structure of India?   
A. State bank of India
B. Reserve bank of India
C. EXIM bank of India
D. Union bank of India

Question. Which statistical measure helps in measuring the purchasing power of money?
A. Arithmetic average
B. Index numbers
C. Harmonic mean
D. Time series

Question. If elasticity of demand is very low, it shows that the commodity is             
A. A necessity
B. A luxury
C. Has little importance in total budget
D. a’ and ‘c’ above

Question. production function shows
A. Technological relationship between inputs and cost
B. Technological relationship between inputs and output
C. Technological relationship between inputs and price
D. Economic relationship between inputs and output

Question. In which market AR curve is parallel to X-axis ?
A. Perfect Competition
B. Monopoly
C. Monopolistic Competition
D. In all the above

Question. 14-An increase in the amount of one of the inputs keeping all other inputs constant results in
A. decrease in output
B. an increase in output
C. consistency in output
D. none of the above

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. The producer’s demand for a factor of production is governed by the ____ of the factor.           
A. Price will decrease
B. Marginal productivity
C. Availability
D. Profitability

Question. opportunity cost is the
A. Next best alternative available
B. Next best alternative sacrificed
C. Next best alternative produced
D. Next best alternative chosen

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. Credit creation power of the commercial banks gets limited by which of the following?                   
A. Banking habits of the people
B. Cash Reserve Ratio
C. Credit policy of the central bank
D. All of the above

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. For every market, which condition has to be fulfilled for firm’s equilibrium ?
A. AR = MC
B. MR = MC
C. MC should cut MR from below
D. Both (b) and (c)

Question. An active factor of production is:
A. Capital
B. Labour
C. Land
D. None of these

Question. The economist’s objections to monopoly rest on which of the following grounds?             
A. There is a transfer of income from consumers to the monopolist
B. There is welfare loss as resources tend to be misallocated under monopoly
C. Both A and B are incorrect
D. Both A and B are correct

Question. What happens to TR when MR is decreasing but remains positive
A. Decreases at increasing rate 
B. Increases at increasing rate
C. Increases at decreasing rate
D. Decreases at decreasing rate

Question. Identify the aspect of taxation which is related to normative economics         
A. Incidence of tax
B. Effect of tax on the capacity willingness to work
C. Equity of tax
D. None of the above

Question 48. On which assumption, the law of supply depends ?
A. There should be no change in income levels of buyers and sellers in the market.
B. Prices of factors of production remain stable
C. Technological level remains constant
D. All the above

Question. The inputs that a firm uses in the production process are called
A. factors of production
B. organs of production
C. production inputs
D. none of the above

Question. In which market AR = MR ?
A. Monopoly
B. Monopolistic Competition
C. Both (a) and (b)
D. Perfect Competition

Question. Other things equal, if a good has more substitutes, its price elasticity of demand is           
A. Larger
B. Smaller
C. Zero
D. Unity

Question. Which of the following is correct ?
A. Perfectly Elastic Supply e_s = ∞
B. High Elastic Supply e_s > 1
C. Perfectly Inelastic Supply e_s = 0
D. All the above

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. The cost of one thing in terms of the alternative given up is called         
A. Real cost
B. Production cost
C. Physical cost
D. Opportunity cost

Question. If the price of goods rises by 60% but supply increases by only 5%, the supply of goods will be:
A. Highly Elastic
B. Elastic
C. Inelastic
D. Perfectly Inelastic

Question. In the short-run following factors are included in the process of production:
A. Fixed factors
B. Variable factors
C. Both (a) and (b)
D. None of these.

Question. Supply is associated with:
A. A Time Period
B. Price
C. Both (a) and (b)
D. None of the above

Question. What is the shape of the average fixed cost (AFC) curve?         
A. U-shape
B. Horizontal up to a point and then rising
C. Sloping down towards the right
D. Rectangular hyperbola

Question. In perfect competition, which of the following remains constant ?
A. AR
B. MR
C. Both AR and MR
D. None of the both

Question.Number of times a unit of money changes hands in the course of a year is called
A. Supply of money
B. Purchasing power of money
C. Velocity of money
D. Value of money

Question. There are factors of productions:
A. Two
B. Three
C. Four
D. Five

Question. Income elasticity of demand is defined as the responsiveness of           
A. Quantity demanded to a change in income
B. Quantity demanded to a change in price
C. Price to a change in income
D. Income to a change in quantity demanded

Question. When the proportionate change in the supply of goods is more than the proportionate change in its price, the elasticity of supply will be:
A. Less than Unit
B. Equal to Unit
C. Greater than Unit
D. Infinite

Question. Which of the following cost will be zero when production is stopped?        
A. Average Fixed cost
B. Total Cost
C. Fixed cost
D. Variable cost

Question. The cost curve which is a rectangular hyperbola is         
A. ATC
B. AFC
C. TFC
D. AVC

Question. Who propounded the opportunity cost theory of international trade?         
A. Ricardo
B. Marshall
C. Heckscher & Ohlin
D. Haberler

Question. An economic theory is           
A. An axiom
B. A proposition
C. A hypothesis
D. A tested hypothesis

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