Chapter 18: Costs & Revenues

Which of the following is a reason for managers knowing the costs of the business?

• They will be able to increase output.
• It will help them fix the price of the product(s).
• The information would have to be published to shareholders.
• Costs will tell the managers what the firm's profits are.

Which one of the following costs is most likely to be variable for a fast food restaurant?

• the salary of the manager
• the rent of the restaurant
• the cost of the food supplies
• the machinery used to cook the food

The best definition of variable costs is:

• They vary with the number of units produced.
• They vary over time.
• They vary with the prices charged by suppliers.
• They vary with tax rates set by government.

If variable costs are $6 per unit,then total variable costs of producing 7,000 units will be:

• $7,000
• $70,000
• $2,100
• $21,000

The best definition of fixed costs are those that do not vary with:

• time
• seasons
• output
• number of workers.

The total revenue of a business is:

• the same as profit
• equal to total costs
• quantity of units produced times unit production cost
• quantity of units sold multiplied by the sellingprice.

The break-even level of output is that number of units where:

• profit is at its highest level
• variable costs equal revenue
• total costs equal revenue
• variable costs equal fixed costs

A product sells for $14. Variable costs are $6.Fixed costs are $120,000. Break-even output is:

• 15,000 units
• 120,000 units
• 40,000 units
• we cannot tell from the information given.

The best definition of the contribution made by a product is:

• the profit made on each item sold
• the revenue gained from selling each item
• the difference between price and variable cost
• the difference between price and fixed cost

Which of the following is the best definition of economies of scale?

• Costs fall as output increases.
• Costs per unit fall as the firm expands.
• Average costs rise as the firm expands.
• Fixed costs fall as output increases.