If a Firm's Per-Unit Costs Fall as It Produces a Larger

question 216

Multiple Choice

If a firm's per-unit costs fall as it produces a larger output,

• A) average variable cost must also decline as output expands.
• B) marginal cost must also decline as output expands.
• C) average fixed cost must be less than average variable costs.
• D) marginal cost must be less than average total cost.

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Definitions:

Temporary Accounts

Accounts that track transactions within a fiscal period and are reset to zero at the start of the next period, including revenues, expenses, and dividends.

Owner's Drawings

Withdrawals of a company's earnings by the owner for personal use, affecting the owner’s equity account in a separately held business.

Accumulated Depreciation

This accounts for the total depreciation expenses charged against a fixed asset since it was put into use, reflecting the decrease in value of the asset.

Income Summary

An account used in the closing process that summarizes revenues and expenses for a period, determining the net income or loss.