Which of the Following Statements Regarding the Relationship Between Average

question 141

Multiple Choice

Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?

• A) There is always a definite relationship between average and marginal cost.
• B) When marginal costs are less than average costs, the latter must fall.
• C) When marginal costs are greater than average costs, the latter must rise.
• D) There is no way for average variable costs to fall when marginal costs are falling.

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Definitions:

Break-Even Point

The point at which total costs equal total revenues, indicating that a business is neither making a profit nor incurring a loss.

Sales Mix

The combination of different products or services that a company sells, impacting its overall profitability and performance.

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs in cost-volume-profit analysis are valid.