Here are 50 non-repetitive assertion-reason multiple-choice questions (MCQs) with answers on the topic of “Cost”. For CUET, Class 11, AP economics, IGCSE, IB.
1. Assertion: Opportunity cost represents the value of the next best alternative foregone.
Reason: It is the monetary cost of producing a good or service.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
2. Assertion: Fixed costs do not vary with changes in the level of production.
Reason: Rent for factory space is an example of a fixed cost.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
3. Assertion: In the long run, all costs are variable.
Reason: Long-run average cost (LRAC) includes both fixed and variable costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
4. Assertion: Economies of scale occur when average cost decreases as production increases.
Reason: Large firms often benefit from economies of scale due to lower per-unit production costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
5. Assertion: Total cost is the sum of fixed cost and variable cost.
Reason: Total cost includes all expenses incurred by a business.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
6. Assertion: In the short run, a firm can adjust its fixed costs.
Reason: Fixed costs remain constant regardless of the level of production.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
7. Assertion: Sunk costs are relevant for future decision-making.
Reason: Sunk costs are costs that have already been incurred and cannot be recovered.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
8. Assertion: Perfect competition is characterized by a large number of firms with differentiated products.
Reason: In perfect competition, firms have significant control over market prices.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
9. Assertion: Marginal cost represents the change in total cost when one more unit is produced.
Reason: Marginal cost is constant at all levels of production.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
10. Assertion: In the short run, a firm should shut down if total revenue is less than total cost.
Reason: Shutting down in the short run ensures that the firm avoids losses.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
11. Assertion: Marginal cost (MC) is below average variable cost (AVC), indicating decreasing AVC.
Reason: When MC is below AVC, each additional unit produced contributes less to the average variable cost.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
12. Assertion: A normal profit in economics means earning zero economic profit.
Reason: Economic profit includes both explicit and implicit costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
13. Assertion: Implicit costs represent the opportunity cost of using the firm’s own resources.
Reason: Implicit costs are out-of-pocket expenses incurred by the firm.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
14. Assertion: Average variable cost (AVC) represents the variable cost per unit of output.
Reason: It is always lower than the average total cost (ATC).
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
15. Assertion: A firm should continue producing in the short run as long as marginal revenue is greater than marginal cost.
Reason: Profit maximization in the short run is achieved when marginal revenue equals marginal cost.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
16. Assertion: The shutdown point occurs when total revenue is equal to variable costs.
Reason: At the shutdown point, a firm covers all its variable costs but cannot cover its fixed costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
17. Assertion: In a monopoly, a firm has significant control over market price.
Reason: Monopolies are characterized by a large number of competing firms.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
18. Assertion: Perfect competition is characterized by many firms selling identical products.
Reason: In perfect competition, each firm has significant control over market prices.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
19. Assertion: In perfect competition, firms are price takers.
Reason: Each firm in a perfectly competitive market can influence market prices.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
20. Assertion: A monopolistic market is characterized by many firms selling identical products.
Reason: Monopolistic competition is characterized by product differentiation.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
21. Assertion: Accounting profit includes only explicit costs.
Reason: Economic profit includes both explicit and implicit costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
22. Assertion: Total cost includes both explicit and implicit costs.
Reason: Explicit costs are relevant for decision-making, while implicit costs are not.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
23. Assertion: Average total cost (ATC) is minimized at the point where marginal cost (MC) equals ATC.
Reason: At this point, the firm produces at its most efficient level.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
24. Assertion: Natural monopolies are characterized by low barriers to entry.
Reason: Natural monopolies often result in many firms competing in the market.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
25. Assertion: Oligopoly is characterized by a large number of firms with differentiated products.
Reason: Oligopolistic markets are typically highly competitive.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
26. Assertion: A firm should produce at the level where marginal cost (MC) equals marginal revenue (MR) to maximize profit in the short run.
Reason: This is the point where the firm covers all costs and earns the highest profit.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
27. Assertion: In the short run, a firm should shut down if the total revenue is less than the total variable cost.
Reason: Shutting down in the short run allows the firm to avoid losses.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
28. Assertion: A monopoly has significant control over market price.
Reason: Monopolies are characterized by many competing firms.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
29. Assertion: In perfect competition, each firm has significant control over market prices.
Reason: Perfect competition is characterized by many firms selling identical products.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
30. Assertion: Monopolistic competition is characterized by product differentiation.
Reason: In monopolistic competition, firms sell identical products.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
31. Assertion: Accounting profit includes only explicit costs.
Reason: Economic profit includes both explicit and implicit costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
32. Assertion: Total cost includes both explicit and implicit costs.
Reason: Explicit costs are relevant for decision-making, while implicit costs are not.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
33. Assertion: Average total cost (ATC) is minimized at the point where marginal cost (MC) equals ATC.
Reason: At this point, the firm produces at its most efficient level.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
34. Assertion: Natural monopolies are characterized by low barriers to entry.
Reason: Natural monopolies often result in many firms competing in the market.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
35. Assertion: Oligopoly is characterized by a large number of firms with differentiated products.
Reason: Oligopolistic markets are typically highly competitive.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
36. Assertion: In a monopoly, a firm has significant control over market price.
Reason: Monopolies are characterized by many competing firms.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
37. Assertion: In perfect competition, each firm has significant control over market prices.
Reason: Perfect competition is characterized by many firms selling identical products.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
38. Assertion: Monopolistic competition is characterized by product differentiation.
Reason: In monopolistic competition, firms sell identical products.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
39. Assertion: Accounting profit includes only explicit costs.
Reason: Economic profit includes both explicit and implicit costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
40. Assertion: Total cost includes both explicit and implicit costs.
Reason: Explicit costs are relevant for decision-making, while implicit costs are not.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
41. Assertion: Average total cost (ATC) is minimized at the point where marginal cost (MC) equals ATC.
Reason: At this point, the firm produces at its most efficient level.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
42. Assertion: Natural monopolies are characterized by low barriers to entry.
Reason: Natural monopolies often result in many firms competing in the market.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
43. Assertion: Oligopoly is characterized by a large number of firms with differentiated products.
Reason: Oligopolistic markets are typically highly competitive.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
44. Assertion: In the long run, a perfectly competitive firm earns zero economic profit.
Reason: Economic profit includes only explicit costs.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
45. Assertion: Implicit costs represent the opportunity cost of using the firm’s own resources.
Reason: Implicit costs are out-of-pocket expenses incurred by the firm.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: b) Both assertion and reason are true, but the reason does not explain the assertion.
46. Assertion: Average variable cost (AVC) represents the variable cost per unit of output.
Reason: It is always lower than the average total cost (ATC).
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
47. Assertion: A firm should produce at the level where marginal cost (MC) equals marginal revenue (MR) to maximize profit in the short run.
Reason: This is the point where the firm covers all costs and earns the highest profit.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
48. Assertion: In the short run, a firm should shut down if the total revenue is less than the total variable cost.
Reason: Shutting down in the short run allows the firm to avoid losses.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: a) Both assertion and reason are true, and the reason explains the assertion.
49. Assertion: A monopoly has significant control over market price.
Reason: Monopolies are characterized by many competing firms.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
50. Assertion: In perfect competition, each firm has significant control over market prices.
Reason: Perfect competition is characterized by many firms selling identical products.
- a) Both assertion and reason are true, and the reason explains the assertion.
- b) Both assertion and reason are true, but the reason does not explain the assertion.
- c) The assertion is true, but the reason is false.
- d) Both assertion and reason are false.
Answer: c) The assertion is true, but the reason is false.
These assertion-reason questions cover various aspects of cost and market structures in economics.