SOPHIA HIGH SCHOOL

GRADE XII (2023-24)

ECONOMICS

COST ANALYSIS

SHORT ANSWERS 2 MARKS EACH

1. What is opportunity cost of a factor of production? 2005
2. Distinguish between explicit cost and implicit cost of a firm. 2006
3. Distinguish between fixed factors and variable factors of production 2007
2016
4. What is the shape of the following: 2007
i. TFC Curve 2014
ii. TVC Curve 2016
iii. AFC Curve
iv. AVC Curve
v. AC Curve
5. Define Marginal Cost and draw a marginal cost curve 2008
6. Identify whether the following costs are implicit costs or explicit costs. Justify 2010
your answer for each:
i. Rent for self-owned land
ii. Payment made for advertising
7. Define variable cost. Give two examples. 2011
8. Define marginal cost. With the help of an example, show how marginal cost can be 2012
obtained from total cost.
9. Why is the marginal cost curve U-Shaped? 2013
2017
10. Distinguish between economic cost and accounting cost 2015
11. What do you understand by opportunity cost. Give an example 2015
2019
12. Define social cost. Give an example 2016
13. Define implicit cost. How is it different from explicit cost? 2018
14. Why is the AVC U-shaped? (one mark) 2023
15. What is meant by accounting cost? (one mark) 2023
16. Calculate Total Variable Cost and Marginal Cost from the data given below: 2023
Output (Units) 0 1 2 3
Total Cost (Rs.) 40 60 78 97
17. Define normal profits
18. Distinguish between short run and long run
19. What would happen to the following types of costs as output is increased?
i. Total fixed cost
ii. Total variable cost
iii. Average fixed cost
iv. Average variable cost
v. Average cost
20. Classify the following into fixed and variable costs: Give reasons for your answer:
i. Rent for land

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 ii. Minimum telephone bill
iii. Cost of raw material
iv. Wages to permanent staff
v. Interest on capital
vi. Payment for transportation of goods
vii. Daily wages
21. What is the difference between TC and TVC called?
SHORT ANSWERS 3 MARKS EACH

22. Explain any three applications of the concept of opportunity cost 2007
23. Draw average variable cost and average total cost curves. Do they intersect each 2010
other? Give one reason for your answer.
24. Why does the TC curve start from the Y-Axis and TVC curve start from the 2013
origin? 2020
25. Explain any one internal and any one external economy. 2013
26. Differentiate between real cost and money cost with the help of examples. 2017
27. The difference between AC Curve and AVC curve decreases with increase in the 2017
output but the two curves never intersect each other. Justify the statement with the 2020
help of a diagram.
28. Explain the shapes of total fixed cost curve and average fixed cost curve. Give one 2018
reason each to justify the shape of the two curves.
29. What is the reason behind the U-shape of the AVC Curve during the short run?
30. Indicate the relationship between AC and MC
31. Indicate the relationship between AVC and MC
32. Why does the MC Curve intersect the AVC and AC curves at their lowest point
only? Explain with the help of diagram.
LONG ANSWERS – 6 MARKS EACH

33. Define average cost and marginal cost of production. Explain the shapes of the 2006
average cost curves.
34. Explain the relationship between total cost, average cost and marginal cost with the 2008
help of diagrams. 2014
35. Define economic cost. Explain the relationship between total cost, total fixed cost 2012
and total variable cost with the help of a diagram.
36. Explain the relationship between average cost and marginal cost with the help of 2014
an appropriate diagram. Can the average cost rise when marginal cost is
diminishing?
STATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR
FALSE, GIVE REASONS.
37. Average cost can fall even when MC is rising
38. As soon as MC starts rising, AVC also starts rising
39. AC and AVC can be equal at any point of time
40. The difference between ATC and AVC is constant
41. As output increases, the difference between ATC and AVC falls and ultimately
becomes zero
42. AVC is a U-Shaped curve
43. MC is not affected by fixed cost
44. Both TC and TFC curves start from the origin

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45. The marginal cost curve can intersect the average cost curve at any point
46. AFC curve touches the Y-Axis because at zero output, AFC is also zero
47. All average cost curves are U-Shaped
48. Cost in Economics means explicit cost only
NUMERICALS
49. From the cost function of a firm given below, calculate:
AFC, AVC AND MC

Output (Units) 0 1 2 3 4 5
Total Cost (Rs.) 30 90 110 120 140 180
50. From the cost function of a firm given below, calculate:
TFC, TVC, AVC, and MC

Output (Units) 0 1 2 3 4
Total Cost (Rs.) 50 70 90 100 110
51. Complete the following table

Output (Units) 0 1 2 3 4 5
Total Cost (Rs.) 30 90 110 120 140 180
52. Complete the following table

Output (Units) 1 2 3
Total Cost (Rs.) 20 26 39
Average Fixed Cost (Rs.) 6 3 2
Average Variable Cost (Rs.)
Marginal Cost (Rs.)
Average Cost (Rs.)
53. From the following table, calculate the following:
TFC, TVC, AFC, AVC, SAC, MC

Output (Units) 0 1 2 3 4 5 6
Total Cost (Rs.) 60 80 100 111 116 130 150
54. From the following table, calculate the following:
TFC, TVC, AFC, AVC, ATC, MC

Output (Units) 0 1 2 3 4 5 6
Total Cost (Rs.) 60 80 100 111 116 130 150
55. From the following table, calculate the following:
TVC, TC and AVC

Output (Units) 1 2 3 4 5 6
AFC (Rs.) 60 30 20 15 12 10
MC (Rs.) 32 30 28 30 35 43
56. Given below is the cost schedule of a firm. Its average fixed cost is Rs. 20 when it
produces 3 units. Calculate its MC and AC at each given level of output.
Output (Units) 1 2 3
AVC (Rs.) 30 28 32
57. Given that total fixed cost is Rs. 20. Calculate TVC and TC from the table given
below:

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 Output (Units) 0 1 2 3
MC (Rs.) 0 10 15 25
58. Calculate AVC and MC from the data given below:
Output (Units) 0 1 2 3 4
TC (Rs.) 80 180 270 350 440
59. Calculate TVC and MC from the data given below:
Output (Units) 0 1 2 3 4
TC (Rs.) 30 48 65 81 98
60. Complete the following table:
Output (Rs.) TVC (Rs.) AVC (Rs.) MC (Rs.)
1 10
8 6
3 27
10 13
61. From the cost function given below:
Calculate AFC, AVC and MC
Output (Units) 0 1 2 3 4
TC (Rs.) 100 250 370 550 740
MULTIPLE CHOICE QUESTIONS IN BOARD EXAMINATION 2021-22
62. The shape of TVC is initially concave downwards and subsequently concave 2021
upwards because:
a. Initially TVC increases at decreasing rate and then increases at increasing
rate
b. Initially TVC decreases at decreasing rate and then increases at diminishing
rate
c. Initially increases at increasing rate and then increases at decreasing rate
d. Initially decreases at decreasing rate and then increases at decreasing rate
63. The type of cost that can be entered in the book of accountancy is: 2021
a. Opportunity cost
b. Real cost
c. Economic cost
d. Money cost
64. Which of the following indicates fixed cost? 2021
a. Expenses on raw materials
b. Salaries of casual workers
c. Electricity bills
d. Interest on loans
65. If TC = Rs. 50 at zero level of output then what will be the value of TFC? 2021
a. Rs. 30
b. Rs. 40
c. Rs. 50
d. Rs. 60
66. Match the cost concepts in List I with their definitions in List 2. 2021
List I (Cost concepts) List II (Description)
A. Explicit i. Change in total cost for a
unit change in output
B. Marginal cost ii. Value of inputs owned and
used in production
C. Implicit cost iii. Costs which a business

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 incurs

a. A-ii, B-i , C-iii

b. A-i, B-ii , C-iii
c. A-iii, B-i , C-ii
d. A-iii, B-ii , C-i

67. Which of the following statement is true? 2021

a. MC is unaffected by variable cost
b. MC is unaffected by fixed cost
c. MC equals change in TR
d. MC is unaffected by price
68. 2021

Observe the above diagram and do as disrected.

i. Choose the correct option
a. When MC > AC, AC falls
b. When MC < AC, AC rises
c. When MC = AC, AC falls
d. When MC > AC, AC rises
ii. MC cuts AC at AC’s _______ point.
a. Maximum point
b. Minimum point
c. When AC is rising
d. When AC becomes parallel to X Axis.

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