Cost, Revenue and Profit Maximization Review

What is included in overhead costs?

• Labor and raw materials

• Interest, rent, taxes, and executive salaries

• Costs that vary with output

• Extra revenue from additional sales

What is marginal revenue?

• Revenue from the sale of one additional unit of output

• Total revenue divided by total cost

• Cost of producing one additional unit

• Fixed cost plus variable cost

What is the guiding question for finding marginal cost?

• How to reduce fixed costs?

• What is the difference between a fixed cost and a variable cost?

• How to increase revenue?

• What is the best way to maximize output?

What is the cost of paying employee salaries and benefits considered as?

• Variable costs

• Fixed costs

• Marginal costs

• Sunk costs

What is the cost associated with the gradual deterioration of capital goods?

• Variable costs

• Fixed costs

• Depreciation

• Sunk costs

What is the marginal cost of the first worker if the additional cost is $90 and the additional output is 7?

• $6.92

• $12.86

• $90

• $7

Why is marginal revenue considered the most useful measure of revenue?

• It helps a firm maximize profit

• It is easier to calculate

• It is the same as average revenue

• It is the least useful measure

What is average revenue?

• The total revenue divided by the number of units sold

• The average price that every unit of output sells for

• The total cost divided by the number of units produced

• The fixed cost per unit

What does the total cost include?

• Only fixed costs

• Only variable costs

• All costs a business has in its operations

• Only labor costs

If 10 more workers are hired at $110 a day, what happens to the total fixed cost?

• It increases

• It decreases

• It remains the same

• It doubles