When Deciding Whether or Not to Undertake an Activity, Economists

question 134

Multiple Choice

When deciding whether or not to undertake an activity, economists compare:

• A) the total cost of the activity against the total benefit received.
• B) the total benefit of the activity against the total cost of production.
• C) the additional cost of the activity against the additional benefits received.
• D) the average cost of the activity versus the total benefits received.

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Definitions:

Break-even Point

The point at which total expenses match total income, leading to neither a loss nor a profit.

Unit Variable Cost

The cost that varies with each unit of product produced, encompassing materials and labor but not fixed costs.

Sales Required

The minimum sales needed to achieve a specific financial goal or to cover costs.

Variable Cost

Costs that vary directly with the level of production or output.