Unit 2 Quiz 5

What are fixed costs and variable costs? Provide examples of each.

• Fixed costs are costs that remain constant regardless of output; examples include rent and salaries. Variable costs are costs that change with the level of output; examples include raw materials and labor.

• Fixed costs are costs that change with the level of output; examples include rent and salaries. Variable costs are costs that remain constant regardless of output; examples include raw materials and labor.

• Fixed costs are costs that change with the level of output; examples include raw materials and labor. Variable costs are costs that remain constant regardless of output; examples include rent and salaries.

• Fixed costs and variable costs are both costs that change with the level of output; examples include raw materials and labor.

How do you calculate marginal cost?

• Marginal cost is calculated by dividing total fixed costs by the quantity of output.

• Marginal cost is calculated by dividing total variable costs by the quantity of output.

• Marginal cost is calculated by dividing the change in total cost by the change in quantity of output.

• Marginal cost is calculated by dividing total revenue by the quantity of output.

What is the profit maximizing rule?

• The profit maximizing rule states that firms should produce where total revenue equals total cost.

• The profit maximizing rule states that firms should produce where marginal cost equals marginal revenue.

• The profit maximizing rule states that firms should produce where average cost equals average revenue.

• The profit maximizing rule states that firms should produce where total cost equals total profit.

Why do larger scale producers often have lower average costs?

• Larger scale producers have lower average costs because they can negotiate higher prices for raw materials.

• Larger scale producers have lower average costs because they can spread fixed costs over a larger quantity of output.

• Larger scale producers have lower average costs because they have higher variable costs.

• Larger scale producers have lower average costs because they produce lower quality products.

How can horizontal and vertical mergers spark business expansion and growth?

• Horizontal and vertical mergers can spark business expansion and growth by reducing competition and increasing market share.

• Horizontal and vertical mergers can spark business expansion and growth by increasing competition and reducing market share.

• Horizontal and vertical mergers can spark business expansion and growth by increasing fixed costs and reducing variable costs.

• Horizontal and vertical mergers can spark business expansion and growth by decreasing total revenue and increasing total cost.

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

• Raw Materials

• Rent

• Labor

• Electricity

What type of cost changes with the amount produced?

• Fixed Costs

• Total Costs

• Variable Costs

• None of the above

Which of the following is NOT an example of a variable cost?

• Raw Materials

• Labor

• Electricity

• Insurance

What is the total cost composed of?

• Fixed costs plus variable costs

• Fixed costs minus variable costs

• Only fixed costs

• Only variable costs

If the production of two more units of output increases total cost from $100 to $120, what is the Marginal Cost (MC)?

• $5

• $10

• $20

• $15