If a Firm Has Low Fixed Costs Relative to All

question 41

Multiple Choice

If a firm has low fixed costs relative to all other firms in the same industry, a large change in volume (either up or down) would have:

• A) a smaller change in EBIT for the firm versus the other firms.
• B) no effect in any way on the firms as volume does not affect fixed costs.
• C) a decreasing effect on the cyclical nature of the business.
• D) a large change in EBIT for the firm versus the other firms.

---

Definitions:

Productivity

The efficiency of production of goods or services, measured by the output per unit of input, such as labor hours, materials, or energy.

Ethically

In a manner that is morally right or acceptable according to societal or professional standards.

Environmentally Friendly

Practices or products that do not harm the environment.

Low Cost Strategy

A business approach aimed at offering products or services at the lowest possible price point to gain competitive advantage and attract price-sensitive customers.