Question 1

​Opportunity cost of an activity

Accepted Answer

A) ​Is included in accounting costs 
B) Does not include monetary costs 
C) May include both monetary costs and foregone incomes 
D) ​Is known with certainty

Question 2

​Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's fixed costs?

Accepted Answer

A) ​$9,000 
B) $10,000 
C) $11,000 
D) ​$12,000

Question 3

​In the short-run:

Accepted Answer

A) ​All inputs are variable 
B) Some inputs are fixed and some inputs are variable 
C) There are no fixed inputs 
D) ​The firm is not restricted in how much it can produce

Question 4

​Fast Food Terminals III
After firing cashiers to install touchscreens for patrons to place orders,Taco Casa determined that their average cost per touchscreen order was $0.65.After determining that the average compensation cost per human mediated order was $0.60 per order,they revert back to human order takers.Then why did the realized average cost per order with humans come in at $0.70?

Accepted Answer

The answer of ​Fast Food Terminals III
After firing cashiers to...

Question 5

​Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total variable costs?

Accepted Answer

A) ​$1000 
B) $3000 
C) $5,000 
D) ​$7,000

Question 6

​Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total costs?

Accepted Answer

A) ​$10,000 
B) $11,000 
C) $12,000 
D) ​$13,000

Question 7

​The fixed-cost fallacy occurs when

Accepted Answer

A) ​A firm considers sunk costs in making decisions 
B) A firm ignores relevant costs 
C) A firm considers overhead or depreciation costs in making decisions 
D) ​Both a and c

Question 8

​A firm wishes to shut down an office and fire 100 employees.The company will save $3000 per month per employee.It is estimated that each employee contributes $4,100 to the company.The firm rents office space for this group of employees at $1500.What should the company do?

Accepted Answer

A) ​Fire the employees and save $1500 on rent 
B) Not fire the employees keeping them generates a profit of $1100 per employee 
C) Not fire the employees since keeping them generates a profit of $1085 per employee 
D) ​None of the above

Question 9

​If a firm is earning negative economic profits,it implies

Accepted Answer

A) ​That the firm's accounting profits are necessarily zero 
B) That the firm's accounting profits are necessarily positive 
C) That the firm's accounting profits are necessarily negative 
D) ​Economic profits alone cannot determine accounting profits

Question 10

​For a restaurant,all the following are fixed costs,except

Accepted Answer

A) ​Space rental 
B) Advertising 
C) Raw material cost 
D) ​All of the above-they are all variable costs

Question 11

​For a moving company,all of the following are examples of variable costs,except

Accepted Answer

A) ​Gasoline costs 
B) Truck rents 
C) Marketing costs 
D) ​None of the above

Question 12

​A manager invests $20,000 in equipment that would help the company reduce it's per unit costs from $15 to $12.He expects the equipment to be in use for the next seven years.After two years,he realizes that if he outsourced the production,the unit cost would be $7 instead.At this point what should the senior manager do?

Accepted Answer

A) ​Charge the manager for the next five years of depreciation 
B) Write off the equipment as sunk cost and allow for outsourcing since it is cheaper 
C) Not allow for outsourcing since the equipment is good for another five years 
D) ​None of the above

Question 13

​A business owner makes 50 items a day.He spends 8 hours in producing those items.If hired elsewhere he could have earned $10 an hour.The item sells for $10 each.Production occurs seven days a week.If the explicit costs total $10,000 a month,the accounting profit for the month equals:

Accepted Answer

A) ​$1,760 
B) $2,240 
C) $11,760 
D) ​$5,000

Question 14

​For a trucking company,all of the following are examples of fixed costs,except

Accepted Answer

A) ​Tax accountant fees 
B) Package designing fees 
C) Insurance 
D) ​Gasoline costs

Question 15

​For a restaurant,all the following are examples of variable costs,except

Accepted Answer

A) ​Labor costs 
B) Cost of raw materials 
C) Rents on dining space 
D) ​None- all of them are variable costs

Question 16

​Economists argue that:

Accepted Answer

A) ​accounting costs include all types of costs,even implicit costs. 
B) every decision has an opportunity cost. 
C) some decisions have opportunity costs,while others don't. 
D) ​economic decisions should include sunk costs.

Question 17

​A manager invests $400,000 in a technology that should reduce the overall costs of production.The company managed to reduce their cost per unit from $2 to $1.85.After the investment has been made,the $400,000 investment is

Accepted Answer

A) ​Considered sunk costs,not relevant in further decision making 
B) Considered sunk costs,but still relevant in further decision making 
C) Considered a loss 
D) ​Considered a profit

Question 18

​All of the following costs are included in the calculation of accounting profit,except

Accepted Answer

A) ​Interest payments on borrowed funds 
B) Costs paid to suppliers for product ingredients 
C) Opportunity cost of capital 
D) ​Depreciation expenses related to investments in buildings and equipment

Question 19

​Which of the following statements is true?

Accepted Answer

A) ​Economic profits ignore implicit costs. 
B) Economic profits include implicit costs. 
C) Accounting profits include all of the opportunity costs. 
D) ​Economists consider sunk costs in their decision making.

Question 20

​You and two partners start a company.However,your partners play no role in running the company.You spend all your time managing the business.The time that you could have spent working for someone else and earning wages instead of running the business is your:

Accepted Answer

A) ​explicit cost. 
B) marginal cost. 
C) sunk cost. 
D) ​opportunity cost.

Exam 2: Benefits, Costs, and Decisions

​Opportunity cost of an activity

​Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's fixed costs?

​In the short-run:

​Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total variable costs?

​Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total costs?

​The fixed-cost fallacy occurs when

​A firm wishes to shut down an office and fire 100 employees.The company will save $3000 per month per employee.It is estimated that each employee contributes $4,100 to the company.The firm rents office space for this group of employees at $1500.What should the company do?

​If a firm is earning negative economic profits,it implies

​For a restaurant,all the following are fixed costs,except

​For a moving company,all of the following are examples of variable costs,except

​A business owner makes 50 items a day.He spends 8 hours in producing those items.If hired elsewhere he could have earned $10 an hour.The item sells for $10 each.Production occurs seven days a week.If the explicit costs total $10,000 a month,the accounting profit for the month equals:

​For a trucking company,all of the following are examples of fixed costs,except

​For a restaurant,all the following are examples of variable costs,except

​Economists argue that:

​A manager invests $400,000 in a technology that should reduce the overall costs of production.The company managed to reduce their cost per unit from $2 to $1.85.After the investment has been made,the $400,000 investment is

​All of the following costs are included in the calculation of accounting profit,except

​Which of the following statements is true?

​You and two partners start a company.However,your partners play no role in running the company.You spend all your time managing the business.The time that you could have spent working for someone else and earning wages instead of running the business is your:

Opportunity cost of an activity

Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's fixed costs?

In the short-run:

Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total variable costs?

Firm X is producing 1000 units,selling them at $15 each.Variable costs are $3 per unit and the firm is making an accounting profit of $3000.What is the firm's total costs?

The fixed-cost fallacy occurs when

A firm wishes to shut down an office and fire 100 employees.The company will save $3000 per month per employee.It is estimated that each employee contributes $4,100 to the company.The firm rents office space for this group of employees at $1500.What should the company do?

If a firm is earning negative economic profits,it implies

For a restaurant,all the following are fixed costs,except

For a moving company,all of the following are examples of variable costs,except

A business owner makes 50 items a day.He spends 8 hours in producing those items.If hired elsewhere he could have earned $10 an hour.The item sells for $10 each.Production occurs seven days a week.If the explicit costs total $10,000 a month,the accounting profit for the month equals:

For a trucking company,all of the following are examples of fixed costs,except

For a restaurant,all the following are examples of variable costs,except

Economists argue that:

A manager invests $400,000 in a technology that should reduce the overall costs of production.The company managed to reduce their cost per unit from $2 to $1.85.After the investment has been made,the $400,000 investment is

All of the following costs are included in the calculation of accounting profit,except

Which of the following statements is true?

You and two partners start a company.However,your partners play no role in running the company.You spend all your time managing the business.The time that you could have spent working for someone else and earning wages instead of running the business is your: