Which of the Following Statements Is True of Fixed Costs

question 100

Multiple Choice

Which of the following statements is true of fixed costs of production in determining whether to accept or reject a special order?

• A)They are increased in proportion to the amount that production increases when a special order is accepted.
• B)They are often considered relevant if the plant is operating at capacity.
• C)If the order can be completed without creating additional fixed costs, they are relevant.
• D)They are always relevant in the decision.

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Definitions:

Pareto Efficient

A condition where resources are distributed in such a manner that improving the situation of one person necessitates the detriment of another.

Initial Endowment

Refers to the initial amount of money, assets, or resources that an individual, firm, or country possesses before entering into any trading or production activities.

Pareto Optimal

An arrangement of resource distribution that prevents the improvement of one individual's condition without adversely affecting another individual.

Utility Function

A utility function is an economic concept that models an individual's preference ordering over a set of goods or outcomes, representing satisfaction or happiness.