Which of the Following Is True If the Volume of Sales

question 171

Multiple Choice

Which of the following is true if the volume of sales increases (within a relevant range) ?

• A) total fixed cost increases
• B) total variable cost decreases
• C) total variable cost increases
• D) total fixed cost decreases

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Definitions:

Output Effect

The output effect is the change in total revenue resulting from selling additional units of a product, considering the impact on price due to supply and demand.

Elastic Demand

A condition where the quantity demanded of a good or service is highly responsive to changes in its price.

Output Effect

The impact on total revenue when a firm changes its output level, considering demand elasticity.

Substitution Effect

The change in consumption patterns due to a relative change in prices leading consumers to substitute one product for another.