Fixed cost is sometimes called Select one: a. total cost b. sunk cost c. variabl

Question

Fixed cost is sometimes called

Select one:

a. total cost

b. sunk cost

c. variable cost

d. marginal cost

e. average total cost

Labor productivity measures

Select one:

a. input per machine per hour

b. input per laborer per hour

c. output per machine per hour

d. output per laborer per hour

e. output per unit of land per hour

An example of a firms fixed cost would be the

Select one:

a. monthly rent it pays based on a multiple-year lease

b. cost of employing labor

c. quantity of inventory it accumulates

d. raw materials used in production

e. cost of shipping the goods it produces

Which of the following is a short-run decision for a muffin shop?

Select one:

a. hire more workers

b. add new ovens

c. expand into the building next door

d. open a second shop on the other side of town

e. go out of business

An example of a variable cost to the firm is the

Select one:

a. monthly rent it pays based on a multiple-year lease

b. cost of shipping the goods it produces

c. property taxes it pays

d. interest payments on a bank loan

e. entrepreneurs opportunity cost

Explanation / Answer

1. (b)

Fixed cost os also called sunk cost because it is already been incurred.

2. (d)

Labor productivity = Output / Labor hours

3. (a)

Rent is example of fixed cost because this is an expense that will be incurred even if production is zero.

4. (a)

A short run decision is also called an operating decision which is taken for day to day operational aspects of the business. Hiring new workers (for producing higher output) is the only example out of the other options given, which are decisions affecting long run aspects of business.

5. (b)

Shipping cost is the only example of a variable cost, from the options given. While for other options, the stated costs will be incurred even with zero output, shipping charges increase with volume of output being shipped.

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