A business owner makes 1,000 items a day. Each day she contributes eight hours to produce those items. If hired elsewhere, she could have earned $250 an hour. The item sells for $15 each. Production does not stop during the weekends. If the explicit costs total $150,000 for 30 days, the firm’s accounting profit for the month equals: $300,000 $60,000 $450,000 $240,000
A business owner makes 1,000 items a day. Each day she contributes eight hours to produce those items. If hired elsewhere, she could have earned $250 an hour. The item sells for $15 each. Production does not stop during the weekends. If the explicit costs total $150,000 for 30 days, the firm’s accounting profit for the month equals:
$300,000
$60,000
$450,000
$240,000
Refer to the situation in part (1). Assume the owner’s only
Yes
No
If the firm is earning negative economic profits, it implies
That the accounting profits are zero
That the accounting profits are negative
That the accounting profits are positive
That more information is needed to determine accounting profits.
The fixed-cost fallacy occurs when
A firm considers irrelevant costs
A firm ignores relevant costs
A firm considers overhead or
Both a and c
All of the following are examples of variable costs except:
Hourly labor costs
Cost of raw materials
Accounting fees
Electricity costs
Managers undertake an investment only if
Marginal benefits of the investment are greater than zero.
MCs (Marginal Cost) of the investment are greater than marginal benefits of the investment
Marginal benefits are greater than marginal costs
Investment decisions do not depend on marginal analysis
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