When an Operation Increases It Sales, Its Cost of Variable

question 12

Multiple Choice

When an operation increases it sales, its cost of variable labor

• A) increases and its variable labor cost percentage increases.
• B) decreases and its variable labor cost percentage increases.
• C) decreases and its variable labor cost percentage is unchanged.
• D) increases and its variable labor cost percentage is unchanged.

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Definitions:

ATC

Stands for Average Total Cost, which is the cost per unit of output, calculated by dividing the total cost by the quantity produced.

Average Total Cost

The sum of all production costs divided by the quantity of output produced, synonymous with the cost per unit including all variable and fixed costs.

Long-run Equilibrium

A state in which all factors of production and costs are variable, and firms in the industry make just enough profit to stay in business.

Short-run Profits

Short-run profits occur when a company's revenue exceeds its operating costs within a particular, relatively brief period.