Which of the Following Is an Example of a Fixed

question 4

Multiple Choice

Which of the following is an example of a fixed cost?

• A) Cost of equipment purchased for an assembly line to be used in the production of a new product.
• B) Assembly costs associated with the production of a new product.
• C) Labor costs associated with the production of a new product.
• D) Shipping costs associated with the sale of a new product.

Apply the rule of 70 to analyze the doubling time for investments and economies.

Recognize how the present value concept affects the quantity of loanable funds demanded.

Identify the principles of moral hazard and adverse selection in insurance markets.

Understand diversification and how it reduces risk in investment portfolios.

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Definitions:

Unit Cost

The cost incurred to produce, store, or acquire one unit of a product, calculated by dividing the total cost by the number of units.

Differential Cost

The difference in cost between two alternative decisions or scenarios.

Sunk Cost

Costs that have already been incurred and cannot be recovered or altered and should not affect future business decisions.

Net Book Value

The value at which an asset is carried on a balance sheet, essentially the cost of the asset minus accumulated depreciation.