Suppose There Are Fixed Costs and Marginal Costs That Are

question 315

Multiple Choice

Suppose there are fixed costs and marginal costs that are constant. Then we know that

• A) average total costs are also constant.
• B) average variable costs decrease continuously as output increases, and lie above the marginal cost curve.
• C) average total costs decrease continuously as output increases, and lie above the average variable cost curve, which also is decreasing continuously.
• D) average total costs decrease continuously as output increases, and lie above the average variable cost curve, which is constant.

---

Definitions:

Salvage Value

The estimated resale value of an asset at the end of its useful life, often considered in depreciation calculations.

Restatement

The revision and republishing of one or more previously issued financial statements to correct an error.

Cash Fund

A reserve of cash set aside for specific needs or emergencies, ensuring liquidity for unexpected expenses.

Gain on Disposal

The profit realized from the sale of an asset for more than its book value.