Cost Theory

Question 1

Important consideration in production is

Answer 1

Cost

Question 2

_______ in the production process has a direct impact on cost

Answer 2

Inefficiency

Question 3

refers to the desire to profit from a project, transaction, or material endeavor

Answer 3

Profit Motivation

Question 4

_____ defined the profit motive in economics in his book “_____ of _____” as the human _______ to truck, barter and trade.

Answer 4

Adam Smith
The Wealth of Nations
proclivity

Question 5

Henry Haslet argues if there is __ profit in producing an article, it indicates that the labor and capital spent on its creation are _____ _____.

Answer 5

no

being wasted

Question 6

the primary mechanism by which markets overcome the profit maximization incentive of individual firms

Answer 6

Competition

Question 7

is the total cost of all items purchased by your organization

Answer 7

Accounting Cost

Question 8

the annual total of all costs associated with conducting business. They are input costs that require an outlay of money by the firm.

Answer 8

Explicit Cost

Question 9

Economic cost is beneficial tool for making _____ _____

Answer 9

business decisions

Question 10

enables you to examine a number of what-if situations and determine the precise impact on your organization

Answer 10

Economic Cost

Question 11

determined by examining your current resources and estimating their prices, as well as the impact on your organization. They are input costs that do not require an outlay of money by the firm.

Answer 11

Implicit Cost

Question 12

the difference between the revenue received from the sale of an output and the costs of all inputs used, as well as any opportunity costs

Answer 12

Economic Profit

Question 13

a form of implicit cost that management determines and varies according to various events and perspectives.

Answer 13

Opportunity Cost

Question 14

refers to the profit in business reports on its income statement.

Answer 14

Accounting Profit

Question 15

Accounting profit is essential for companies’ ______ _______

Answer 15

financial transparency

Question 16

Economic Profit is _____ _____ to regulators, investors, or financial institutions and is not required to be reflected on _______ _______.

Answer 16

not disclosed

financial statements

Question 17

When faced with production level or other business alternatives, businesses and individuals make choices to ______ _____ ______.

Answer 17

prioritize economic profit

Question 18

a sort of what-if analysis.

Answer 18

Profitability analysis

Question 19

may be used to compare to the income that would have been gained had a different alternative been chosen.

Answer 19

Economic Profit

Question 20

the creation or extraction of value

Answer 20

Entrepreneurship

Question 21

Entrepreneurs are viewed as _____ _____

Answer 21

national assets

Question 22

Great entrepreneurs have the capacity to ___ the ___ ____ ____ and work

Answer 22

alter the way we live

Question 23

discoveries may raise _____ ____while also creating wealth from _____ _____ and contributing to a rising economy

Answer 23

living standards

entrepreneurial endeavors

Question 24

costs that do not change with an increase or decrease in the amount of goods or services produced or sold

Answer 24

Fixed Cost

Question 25

Fixed expenses are established by ____ ______ or _______.

Answer 25

contract agreements or timetables

Question 26

corporate expenses that changes in proportion to how much a company produces or sells.

Answer 26

Variable Cost

Question 27

Variable cost fluctuate according to the _____ and ____ _____ of the company

Answer 27

production and sales volume

Question 28

are frequently used to minimize fixed expenses.

Answer 28

Shut down point

Question 29

The ____ ____ of the business is comprised of both fixed and variable costs.

Answer 29

entire cost or total cost

Question 30

mix of the two costs

Answer 30

Semi-variable, Semi-fixed, or Mixed costs

Question 31

fixed cost per unit in producing a commodity. It is distributed as production expands over larger number of units.

Answer 31

Average Fixed Cost

Question 32

variable cost per unit in producing a commodity

Answer 32

Average Variable Cost

Question 33

the total cost per unit in producing a commodity.

Answer 33

Average Total Cost

Question 34

AFC =

Answer 34

Total Fixed Cost / Units of Output

Question 35

AVC =

Answer 35

Total Variable Cost / Units of Output

Question 36

ATC =

Answer 36

Total Cost / Units of Output or AFC + AVC

Question 37

is the additional to the total cost or total variable cost caused by producing an extra unit.

Answer 37

Marginal Cost

Question 38

MC=

Answer 38

Total Cost n - Total Cost n-1 or Total Variable Cost n - Total Cost n-1

Question 39

MC < AC or ATC, what happens to ATC?

Answer 39

ATC decreases

Question 40

MC = ATC, what happens to ATC?

Answer 40

ATC is minimum and constant

Question 41

MC > ATC, what happens to ATC?

Answer 41

ATC increases

Question 42

MC < AVC, what happens to AVC?

Answer 42

AVC decreases

Question 43

MC = AVC, what happens to AVC?

Answer 43

AVC is minimum and constant

Question 44

MC > AVC, what happens to AVC?

Answer 44

AVC increases

Question 45

Refers to money that has already been spent and cannot be recovered.

Answer 45

Sunk Cost

Question 46

Sunk Costs are _____ from future businesses decision because the cost will ____ the ____ regardless of the outcome of the decision.

Answer 46

excluded
remain
same