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:

Pure Monopolist

A single seller in a market with no close substitutes for the product, resulting in complete market control.

Pure Competitor

A market participant in an industry where many sellers offer identical products, and no single seller can influence market price.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for competition on factors other than price.

Product Differentiation

The method of making a product or service stand out from the competition to appeal more to a specific target audience.