Business Costs & Scale of Production

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

• they will be able to increase output

• the information will have to be published to the shareholders

• it will help them to fix the price of the products

• costs will tell the mangers without any other information, how much profits the business makes

Which of the following is an example of a variable cost?

• rent

• insurance premium

• salaries

• raw materials

What are fixed costs?

• the cost of making one unit of output

• costs that do not vary with the level of output

• costs that vary with the level of output

• total costs

Which of the following would enable you to calculate the total costs?

• average costs + fixed cost

• fixed costs - total variable costs

• variable costs + average costs

• fixed costs + total variable costs

The average cost is calculated by using which of the following?

• fixed costs divided by output

• total costs divided by output

• revenue divided by output

• total variable costs divided by output

Which of the following is NOT an economy of scale?

• purchasing economies

• communication economies

• marketing economies

• technical economies

Which economy of scale is being described here?

"Banks will often offer businesses lower rate of interest when they take a large amount of loan."

• managerial

• financial

• marketing

• technical

Which of the following is a benefit of economies of scale?

• it leads to lower efficiency and higher average costs

• it takes longer for decisions to be communicated to all part of a business

• the average costs of marketing falls as sales increase

• sending and receiving accurate messages take longer time

If the variable costs are $2 per unit, then the total variable costs of producing 5 000 units will be:

• $1 000

• $2 500

• $5 002

• $10 000

'Business costs are not the only factor which determines the success of a business'.

• TRUE

• FALSE

• BOTH

• NOT SURE