ch06 - File Ch06 CHAPTER 6 Cost Analysis Each question...

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File: Ch06; CHAPTER 6: Cost Analysis Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1 Relevant Costs 2 The Costs of Production 3 Returns to Scale, Scope, and Learning 4 Cost Analysis and Optimal Decisions 5 Appendix: Transfer Pricing 6 Special Appendix MULTIPLE CHOICE 1. Accounting profit typically exceeds economic profit because a) Accounting profit includes intangible revenue sources. b) Economic cost includes all relevant opportunity costs. c) Accounting cost contains implicit costs. d) Accounting practice is to allocate fixed costs to other activities. e) This is incorrect. Economic profit is usually greater than accounting profit. ANSWER: b SECTION: 1 2. The opportunity cost of investing all of your savings in a new business is equal to 3. The total economic cost of pursuing a three-year Masters degree after college is equal to 6-1
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Cost Analysis 4. A manager considering alternative courses of action should 5. Money spent on past research and development should be considered a) Implicit costs. b) Variable costs. c) Sunk costs. d) Relevant costs. e) Opportunity costs. ANSWER: c SECTION: 1 6. A law firm will be paid $500 to send one of its lawyers to take a routine deposition. The firm can send a 2nd-year lawyer whose usual billing rate is $150 per hour and who will lose a half day from working on a lucrative tax deal. Or it can send a 4th-year associate (billing rate $200 per hour) who is currently overseeing the selection and hiring of law students as summer associates. The firm should
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