Lesson 4.1.4.4

4.1.4.4 Costs of production Quiz: AQA Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.1.4.4, Costs of production: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.

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The 20 questions

  1. Fixed costs are costs that:

    • are equal to total revenue.
    • vary directly with the level of output.
    • are only paid in the long run.
    • do not vary with the level of output in the short run.

  2. Variable costs are costs that:

    • are equal to average revenue.
    • never change with output.
    • change as the level of output changes.
    • are always zero in the short run.

  3. A firm has total fixed costs of £100 and total variable costs of £150 at an output of 10 units. What is total cost?

    • £100.
    • £250.
    • £150.
    • £15.

  4. A firm has total fixed costs of £100 and total variable costs of £150 at 10 units. What is average total cost at 10 units?

    • £15.
    • £250.
    • £25.
    • £10.

  5. A firm has total fixed costs of £100 at every level of output. What is average fixed cost at 10 units?

    • £100.
    • £25.
    • £10.
    • £15.

  6. The firm's total cost rises from £250 at 10 units to £275 at 11 units. What is marginal cost?

    • £25.
    • £275.
    • £15.
    • £2.50.

  7. Which of the following is the correct definition of average variable cost?

    • Marginal cost multiplied by output.
    • Total variable cost divided by output.
    • Total fixed cost divided by output.
    • Total cost divided by output.

  8. Marginal cost is best defined as:

    • the cost of producing the first unit of output only.
    • the change in total cost arising from producing one more unit of output.
    • the fixed cost spread across all units.
    • the average cost of all units produced.

  9. In the short run, which cost is unaffected by changes in output?

    • Marginal cost.
    • Average variable cost.
    • Variable cost.
    • Fixed cost.

  10. Why does average fixed cost fall continuously as output rises?

    • Because fixed costs fall as output rises.
    • Because variable costs fall as output rises.
    • Because marginal cost falls as output rises.
    • Because fixed costs are spread over a larger number of units of output.

  11. A firm's average variable cost falls from £60 to £50 as output rises, and then rises after a point. Which is the most likely explanation for the initial fall?

    • Diminishing returns to all factors.
    • Rising wages for workers.
    • Rising fixed costs.
    • Increasing productivity of variable inputs and efficient use of fixed capacity.

  12. The U-shaped average total cost curve in the short run is explained mainly by:

    • the fall in average fixed cost and then the rise in average variable cost due to diminishing returns.
    • constant returns to scale in all factors.
    • the rise in fixed costs as output increases.
    • the fall in marginal cost and constant average variable cost.

  13. Marginal cost cuts average total cost at the minimum point of the average total cost curve. Why?

    • Because MC always equals ATC at every output.
    • Because when MC is below ATC, ATC falls, and when MC is above ATC, ATC rises, so MC crosses ATC at its minimum.
    • Because the minimum point is where total revenue is maximised.
    • Because the minimum point is where fixed costs are zero.

  14. Costs for a firm: output 1: TVC 60; 2: TVC 110; 3: TVC 150; with TFC of £100. What is the marginal cost of the third unit?

    • £50.
    • £150.
    • £60.
    • £40.

  15. A firm has total fixed costs of £100 and total variable costs of £150 at 3 units of output. What is its average total cost?

    • £250.
    • £50.
    • About £83.33.
    • £33.33.

  16. Which of the following best explains why long-run costs can be lower than short-run costs for the same output?

    • In the long run there is no need for any inputs.
    • In the long run fixed costs are removed entirely.
    • In the long run the firm can change all its factors, including fixed capital, to find a cheaper scale of production.
    • In the long run the firm's output is always zero.

  17. A rise in the wage rate, all else equal, will most likely:

    • raise the cost of labour-intensive production and may encourage firms to use more capital.
    • lower the costs of all firms in the market.
    • reduce the marginal product of labour to zero.
    • have no effect on the choice of inputs.

  18. A rise in the price of raw materials will most likely shift which cost curves?

    • It shifts the average and marginal cost curves upward, since variable costs rise.
    • It shifts the fixed cost curve but not the marginal cost curve.
    • It has no effect on any cost curve.
    • It shifts only the average fixed cost curve.

  19. Which of the following best evaluates the claim that a firm should always minimise average cost?

    • The claim is incorrect because average cost is irrelevant to firms.
    • The claim is incomplete, because profit depends on revenue as well as cost, so the profit-maximising output may differ.
    • The claim is always correct because profit depends only on average cost.
    • The claim is correct only for firms in the public sector.

  20. Which of the following correctly describes the difference between a short-run and a long-run cost curve?

    • The short-run cost curve shows revenue, while the long-run curve shows costs.
    • The short-run and long-run curves are identical, with different labels.
    • The short-run cost curve has no fixed costs, while the long-run cost curve has only fixed costs.
    • The short-run cost curve has at least one fixed factor, while long-run average cost is the lowest cost when all factors vary.

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