An Understanding of Opportunity Costs Is Important to Understanding

question 126

Multiple Choice

An understanding of opportunity costs is important to understanding:

• A) how to calculate the total revenue generated by a firm.
• B) how to assess the economic profitability of a firm.
• C) the tax liability of a firm.
• D) how accountants calculate accounting profits.

---

Definitions:

Variable Costs

Costs that change in proportion to the level of activity of a business, such as material and labor costs.

Break-even Point

The point at which total revenues equal total costs, resulting in neither profit nor loss, indicating the minimum sales volume necessary to cover all costs.

Salary Increases

The upward adjustment or rise in an individual’s or group's pay rate, typically as a result of performance reviews, promotions, or inflation adjustments.

Break-even Point

The point at which total costs equal total revenue, indicating no profit or loss.