Economics - Study Mode
[#1201] The following are some of the costs of a clothing manufacturer. State which among them will you consider as fixed cost?
Correct Answer
(C) Depreciation on machines owing to time
Explanation
Solution: Depreciation on machines owing to time is considered as fixed cost. Depreciation is a fixed cost, because it recurs in the same amount per period throughout the useful life of an asset. Depreciation cannot be considered a variable cost, since it does not vary with activity volume. However, there is an exception.
[#1202] The cost that a firm incurs in hiring or purchasing any factor of production is referred to as
Correct Answer
(A) Explicit cost
Explanation
Solution: The cost that a firm incurs in hiring or purchasing any factor of production is referred to as Explicit cost. An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, as opposed to implicit costs, where no actual payment is made.
[#1203] Supply of a commodity is a
Correct Answer
(B) Flow concept
Explanation
Solution: Supply of a commodity is a flow concept. the commodity which the sellers or producers are able and willing to offer for sale at a particular price, during a certain period of time.
[#1204] If two goods were perfect substitutes of each other, it necessarily follows that
Correct Answer
(B) An indifference curve relating the two goods will be linear
Explanation
Solution: If two goods were perfect substitutes of each other, it necessarily follows that an indifference curve relating the two goods will be linear. As price rises for a fixed money income, the consumer seeks the less expensive substitute at a lower indifference curve.
[#1205] The MC curve cuts the AVC and ATC curves at
Correct Answer
(C) Their respective minimas
Explanation
Solution: The MC curve cuts the AVC and ATC curves at their respective minimas.