Managerial Economics 4th Edition Luke M. Froeb – Test Bank

1. ​Variable costs are

  a.  ​costs that vary with output

  b.  ​not important in decision making

  c.  ​costs that do not vary with output

  d.  ​equal to total costs

ANSWER:   a

TOPICS:   Section 1: Background: Variable, fixed and Total Costs

2. ​A business incurs the following costs per unit: Labor  $125/unit; Materials $45/unit and rent  $250,000/month. If the firm produces 1,000,000 units a month, the total variable costs equal

  a.  ​$125Million

  b.  ​$45Million

  c.  ​$1Million

  d.  ​$170Million

ANSWER:   d

TOPICS:   Section 1: Background: Variable, fixed and Total Costs

3. ​A business incurs the following costs per unit: Labor  $125/unit; Materials $45/unit and rent  $250,000/month. If the firm produces 1,000,000 units a month, the total fixed costs equal

  a.  ​$250,000

  b.  ​$50,000

  c.  ​$20,500

  d.  ​$30,000

ANSWER:   a

TOPICS:   Section 1: Background: Variable, fixed, and Total Costs

4. ​A business incurs the following costs per unit: Labor  $125/unit; Materials $45/unit and rent  $250,000/month. If the firm produces 1,000,000 units a month, the total costs equal

  a.  ​$125,250,000

  b.  ​$170,250,000

  c.  ​$125,050,000

  d.  ​$170,050,000

ANSWER:   b

TOPICS:   Section 1: Background: Variable, fixed, and Total Costs

5. ​Firm X is producing 1000 units, selling them at $15 each. Variable costs are $3 per unit and the firm is making an accounting profit of $3000. What are the firm’s fixed costs?

  a.  ​$9,000

  b.  ​$10,000

  c.  ​$11,000

  d.  ​$12,000

ANSWER:   a

TOPICS:   Section 1: Background: Variable, fixed and Total Costs

6. ​Firm X is producing 1000 units, selling them at $15 each. Variable costs are $3 per unit and the firm is making an accounting profit of $3000. What is the firm’s total variable costs?

  a.  ​$1000

  b.  ​$3000

  c.  ​$5,000

  d.  ​$7,000

ANSWER:   b

TOPICS:   Section 1: Background: Variable, fixed and Total Costs