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Cost Concepts-Qa - PT

The document presents a series of questions and answers related to cost concepts in economics, including fixed costs, variable costs, opportunity costs, sunk costs, direct costs, marginal costs, total costs, implicit costs, and controllable costs. Key answers include that rent of the factory is a fixed cost, variable costs change with production levels, and the marginal cost of producing an additional unit is $20. The document serves as a quiz or study guide for understanding these financial terms.

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moymoythegreat1
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7 views3 pages

Cost Concepts-Qa - PT

The document presents a series of questions and answers related to cost concepts in economics, including fixed costs, variable costs, opportunity costs, sunk costs, direct costs, marginal costs, total costs, implicit costs, and controllable costs. Key answers include that rent of the factory is a fixed cost, variable costs change with production levels, and the marginal cost of producing an additional unit is $20. The document serves as a quiz or study guide for understanding these financial terms.

Uploaded by

moymoythegreat1
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Which of the following is a fixed cost?

A) Raw materials
B) Direct labor
C) Rent of the factory
D) Electricity usage

Answer: C) Rent of the factory

2. Variable costs are those that:

A) Remain constant regardless of production levels


B) Change with the level of production
C) Are not relevant in decision-making
D) Are always higher than fixed costs

Answer: B) Change with the level of production

3. The cost of the next best alternative forgone is known as:

A) Fixed cost
B) Marginal cost
C) Opportunity cost
D) Sunk cost

Answer: C) Opportunity cost

4. Which of the following is an example of a sunk cost?

A) Money spent on new equipment


B) Future marketing expenses
C) Salaries for new employees
D) Raw materials for production

Answer: A) Money spent on new equipment

5. What type of cost is directly associated with the production of a product?

A) Indirect cost
B) Direct cost
C) Sunk cost
D) Opportunity cost

Answer: B) Direct cost


6. Marginal cost is the cost incurred when:

A) A company stops production


B) Producing one additional unit
C) Reducing fixed costs
D) Expanding a factory

Answer: B) Producing one additional unit

7. The sum of fixed and variable costs is called:

A) Marginal cost
B) Opportunity cost
C) Total cost
D) Direct cost

Answer: C) Total cost

8. Which of the following is NOT an example of an implicit cost?

A) Foregone rent from a company-owned building


B) Interest on self-invested capital
C) Wages paid to workers
D) Owner’s time spent on business operations without salary

Answer: C) Wages paid to workers

9. A cost that can be influenced or controlled by management is called:

A) Sunk cost
B) Controllable cost
C) Indirect cost
D) Opportunity cost

Answer: B) Controllable cost

10. If total cost of producing 10 units is $500 and total cost of producing 11 units is $520, what is the
marginal cost of the 11th unit?

A) $20
B) $50
C) $520
D) $500

Answer: A) $20

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