The Lower the Cost of Sales Compared to ________, the Higher

question 15

Multiple Choice

The lower the cost of sales compared to ________, the higher the gross profit.

• A) assets
• B) revenue
• C) gross margin
• D) operating expenses

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Definitions:

Average Increasing

A situation in which the average cost of production goes up as the quantity produced increases.

Long-run Average Total Cost

The average cost per unit of output produced over a period during which all inputs, including capital, are variable.

Diseconomies of Scale

The situation in which a business experiences an increase in average costs per unit when output is increased beyond a certain point.

Economies of Scale

The economic benefits gained by companies because of their large scale of operation, which typically results in a lower cost per unit of output as the scale increases.