The Nature of a Firm's Cost (Fixed or Variable) Depends

question 476

Multiple Choice

The nature of a firm's cost (fixed or variable) depends on the

• A)firm's revenues.
• B)time horizon under consideration.
• C)price the firm charges for output.
• D)explicit but not implicit costs.

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Definitions:

Fixed Costs

Overheads, such as rent, insurance fees, and payroll, that stay the same, independent of the amount of goods produced or sold.

Sensitivity Analysis

An analysis method to evaluate how changes in the values of an independent variable influence a dependent variable, based on a set of given assumptions.

NPV

Stands for Net Present Value, a method used in capital budgeting to evaluate the profitability of an investment or project.

Scenario Analysis

The process of analyzing and evaluating possible future events by considering various feasible outcomes or scenarios, typically to assess potential risks and impacts.