Understanding Costs and Revenue

Which of the following is a fixed cost?

• Raw materials

• Electricity for machinery

• Factory rent

• Wages for hourly workers

What happens to total variable cost when output increases?

• It remains the same

• It decreases

• It increases

• It doubles automatically

If a company sells 100 units of a product at $5 each, what is its total revenue?

• $100

• $500

• $50

• $5

Which formula correctly calculates total revenue?

• Fixed Costs + Variable Costs

• Total Revenue - Total Costs

• Selling Price × Quantity Sold

• Profit × Costs

What is meant by 'break-even point'?

• When total revenue is more than total costs

• When total costs equal total revenue

• When the business starts making profit

• When variable costs are covered

If total revenue is $2,000 and total cost is $1,500, what is the profit?

• $3,500

• $2,500

• $500

• $1,500

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

• Business insurance

• Loan interest

• Sales commission

• Office rent

What does 'average cost' mean in business?

• The cost of the most expensive product

• Total revenue divided by units sold

• Total cost divided by units produced

• Variable cost minus fixed cost

Which of the following increases profit?

• Increasing fixed costs

• Lowering selling price

• Increasing variable costs

• Increasing sales while keeping costs constant

A business lowers its variable costs per unit. What is the likely effect on profit (assuming selling price stays the same)?

• Profit will decrease

• No change in profit

• Profit will increase

• Profit becomes zero