Figure 13-6 -Refer to Figure 13-6. Why Doesn't the Total Cost Curve

question 605

Multiple Choice

Figure 13-6
-Refer to Figure 13-6. Why doesn't the total cost curve begin at the origin (the point 0,0) ?

• A)because variable costs are positive when output is zero
• B)because fixed costs are positive when output is zero
• C)because the firm is producing at the efficient scale
• D)because the firm is maximizing profits

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can increase its profits by increasing sales, given its fixed costs.

Scenario Analysis

A process of analyzing possible future events by considering alternative possible outcomes (scenarios), thus helping in the decision-making process.

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment, discounted back to their present value.

Worst Case Scenario

The most adverse or negative outcome that can occur in a given situation.