Which of the Following Is the Difference Between Variable Costs

question 65

Multiple Choice

Which of the following is the difference between variable costs and fixed costs?

• A) Variable costs are the costs incurred on variable factors of production, whereas fixed costs are the costs incurred on all factors of production.
• B) Variable costs of a firm are zero after a firm shuts down, whereas the firm continues to incur the fixed costs of production in the short run.
• C) Variable costs exist even when production is zero, whereas fixed costs exist only when there is some positive level of production.
• D) Variable costs are incurred by a firm only in the long run, whereas the firm incurs some fixed costs in both the short run and the long run.

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Definitions:

Owner's Equity

The residual interest in the assets of a business after deducting its liabilities, representing the ownership's claim on the assets.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or a business cycle, whichever is longer.

Long-Term Liabilities

Obligations or debts a company is responsible for paying beyond one year from the date of the balance sheet.

Current Asset

Assets that are expected to be converted into cash, sold, or consumed within a year or within the operating cycle of the business, whichever is longer.