Price is 20 and variable cost is 12 per unit. Find unit contribution.
Answer and explanation
8 currency units
20−12=8.
Subjects
Microeconomics
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Sample exercises
Fixed cost is 100 and contribution 8 per unit. Find minimum whole units to break even.
Answer and explanation
13 units
100/8=12.5, rounded upward to 13.
Which is the opportunity cost of a choice?
- The value of the next-best forgone feasible alternative
- Always zero if no cash changes hands
- Only the receipt total
- Every past sunk cost automatically
Answer and explanation
The value of the next-best forgone feasible alternative
Opportunity cost concerns what is given up.
Revenue is 300 and total cost is 250. Find model profit.
Answer and explanation
50 currency units
Revenue minus total cost is 50.
Why can a cost be fixed in one time horizon but variable in another?
Answer and explanation
Contracts, capacity and staffing can be adjustable over longer periods even when fixed during a short operating interval.
Credit time-dependent constraints.
Should a past unrecoverable sunk cost automatically determine a new choice?
- Yes, always
- Only when printed in bold
- Only if the cost is large
- No
Answer and explanation
No
Relevant future consequences and alternatives should be considered.
Study notes
Costs, contribution and opportunity cost
Fixed cost is unchanged over the stated output range; variable cost changes with output in the specified model. Real classifications depend on time horizon.
Grades 9–12Costs, contribution and opportunity cost · revision notes
Fixed cost is unchanged over the stated output range; variable cost changes with output in the specified model. Real classifications depend on time horizon.
Grades 9–12Break-even sales volume
Assume constant per-unit values and no capacity limits; this is an educational accounting model.
Grades 9–12Break-even sales volume · formula reference
Assume constant per-unit values and no capacity limits; this is an educational accounting model.
Grades 9–12Point price elasticity of linear demand
This uses the signed elasticity convention; the absolute magnitude is sometimes reported instead.
UniversityPoint price elasticity of linear demand · formula reference
This uses the signed elasticity convention; the absolute magnitude is sometimes reported instead.
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