Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 3, Problem 6MC
To determine
Reason for occurring fixed cost fallacy.
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Large costs incurred in an investment that cannot be easily recovered are called
a.
Variable Costs
b.
Sunk Costs
c.
Marginal Costs
d.
Maximal Costs
The cost that cannot be recovered if a firm goes out of business is known as __________.
a.
Cost of production
b.
Sunk cost
c.
Actual cost
d.
Direct cost
__________ refers to the additional cost spent to produce one more unit of the product.
a.
Marginal cost
b.
Money cost
c.
Sunk cost
d.
Average cost
Chapter 3 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- Fixed cost is a. Any cost that does not vary with the quantity of output. b. The ratio of total cost to total quantity of output. c. The market value of an asset at the end of its life less its disposal costs. d. The incremental cost of producing one more unit of output.arrow_forwardMarginal cost is a. Any cost occurring after “time now” b. The ratio of total cost to total quantity of output c. The market value of an asset at the end of its life less its disposal costs d. The incremental cost of producing one more unit of output.arrow_forwardA firm earns normal profit Selected Answer: c. when explicit costs equal implicit costs. Answers: a. when accounting profit equals explicit costs. b. when economic profit equals implicit costs. c. when explicit costs equal implicit costs. d. when economic profit equals explicit costs. e. when accounting profit is less than implicit costs.arrow_forward
- a. Define explicit costs and implicit costs. b. Assume the following: * A firm buys a unit of capital for $300. * This capital generates $500 of total revenue for the firm. * This firm could have earned a 10% rate of return from the best alternative use of its $300. Determine the values of explicit cost, implicit cost, and profit. Give economic meaning to the value of profit.arrow_forwardWhich of the following best defines a sunk cost? A. Costs that have already been incurred and cannot be recovered. B. The variable costs associated with increasing production. C. The total costs including both fixed and variable costs. D. Future costs that are expected to be incurred as a result of current decisions.arrow_forwardA cost that changes with the level of production is called a(n)____cost a.variable b.average total c.marginal b.fixedarrow_forward
- Need answers ASAP... Which of these costs is considered as the most important cost because if it is not met, an enterprise may fail to materialize. a. All of these b. Increment cost c. Fixed cost d. First costarrow_forwardDiseconomies of scale are present when. Select one or more: a. total costs fall as output rises b. total costs rise as output rises O c. long run average costs rise as output rises d. marginal costs risearrow_forwarda. Why will firms in most markets be located at or close to the bottom of the longrun average cost curve? b. Distinguish between implicit and explicit costs. How is it possible to havepositive accounting profit and negative economic profit concurrently? c. Distinguish between economies of scale and constant returns to scale. What shape will the long-run average cost curve have for economies of scale andconstant returns to scale. d. What is the difference between production in the short run and production in the long run? Explain the shape of the long-run cost curve in relation to shortrun cost curves?arrow_forward
- In the long run, if 1,000 units are produced at a cost of $8,000 and 1,200 units at a cost of $9,200, then in this output range there are Select one: a. economies of scale b. increasing marginal returns c. diminishing marginal returns d. decreasing marginal costs e. diseconomies of scalearrow_forwardA producer borrows money and start a business . He himself looks after the business. Identify the explicit and implicit costs from this information. Please write the answer in brief.arrow_forwardA business incurs the following costs: • Labor: $125/unit • Materials: $95/unit • Rent: $450,000/month Assume the firm produces 1 million units per month. The total variable cost, per month, is $ million. The total fixed cost, per month, is $ million. The total cost is $ million. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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