When a Firm's Average Variable Cost Is Constant-No Matter How

question 177

Multiple Choice

When a firm's average variable cost is constant-no matter how much is produced-then the firm's:

• A) average cost will increase as the quantity produced increases.
• B) fixed cost must be zero.
• C) average cost will also be constant.
• D) average fixed cost will also be constant.
• E) average cost will decrease as the quantity produced increases.

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Definitions:

Revenue And Expense Accounts

Accounts in financial statements that track the income generated and the costs incurred during a specific period.

Owners' Equity Accounts

Accounts that reflect the owners' stake in the company, including capital contributed and retained earnings minus any drawings or distributions to the owners.

Balance Sheet

A snapshot in financial reporting that captures a company's resources, owed amounts, and the value belonging to its shareholders at a distinct instant.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly, resulting in a consistent expense charge over each period.