Title: QUIZ: Costs of Production and the Shutdown Decision -- Economic Lowdown Audio Series
Course: Andria Testing FRE2 > Section: Costs of Production and the Shutdown Decision -- Economic Lowdown Audio Series

Q: Which of the following is a fixed cost?
- Cups
- Rent
- Coffee beans
- Wages
A: Rent

Q: Total cost is the sum of  __________.
- accounting profit and total revenue
- explicit costs and implicit costs
- fixed costs and opportunity costs
- fixed costs and variable costs
A: fixed costs and variable costs

Q: Which of the following is a correct formula for determining accounting profit?
- Total Revenue – Fixed Cost + Variable Cost
- Total Revenue + Fixed Cost – Variable Cost
- Total Revenue – Fixed Cost – Variable Cost
- Total Revenue + Fixed Cost + Variable Cost
A: Total Revenue – Fixed Cost – Variable Cost

Q: What should a business do in the short run if its total revenue is less than its total costs?
- Shut down immediately
- Shut down only if its accounting profit is less than its economic profit
- Shut down only if its total revenue is less than its variable costs
- Shut down only if its total revenue is less than its fixed costs
A: Shut down only if its total revenue is less than its variable costs

Q: What is an opportunity cost?
- The value of the next best alternative when you make a decision
- The sum of fixed costs and variable costs
- A cost a business pays out-of-pocket
- A cost that must be paid in the short run even if a business shuts down
A: The value of the next best alternative when you make a decision

Q: Holly made $4000 a month in her previous career.  She recently opened a boutique. The boutique generates $4000 more per month in revenue than the total of her fixed and variables costs. What can we say about Holly’s business?
- Holly’s business is earning an economic profit.
- Holly’s business is earning an economic loss.
- Holly’s business is earning a normal profit.
- Holly’s business is earning an accounting loss.
A: Holly’s business is earning a normal profit.

Q: Which type of cost is factored into economic profit but is not factored into accounting profit?
- Opportunity cost
- Fixed cost
- Variable cost
- Explicit cost
A: Opportunity cost