Which of the Following Statements Concerning Variable Costs Is (Are)

question 39

Multiple Choice

Which of the following statements concerning variable costs is (are) correct?
I. Variable costs minus fixed costs equal marginal costs.
II. Variable costs are equal to zero when production is equal to zero.
III. An increase in variable costs increases the operating cash flow.

• A) II only
• B) III only
• C) I and III only
• D) II and III only
• E) I and II only

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Definitions:

Normal Goods

Goods for which demand increases when consumer income rises, and decreases when consumer income falls, showing a direct relationship between income and demand.

Full Income

The total earnings, including all sources of income and gains, not just wages from employment.

Dividend Income

Income received from owning shares of a company, typically paid out from the company's profits to shareholders at regular intervals.

Nonlabor Income

Income received from sources other than employment or the active exertion of effort, such as dividends, interest, or rental income.