Other Things Equal, If the Prices of a Firm's Variable

question 299

Multiple Choice

Other things equal, if the prices of a firm's variable inputs were to fall,

• A)one could not predict how unit costs of production would be affected.
• B)marginal cost, average variable cost, and average fixed cost would all fall.
• C)marginal cost, average variable cost, and average total cost would all fall.
• D)average variable cost would fall, but marginal cost would be unchanged.

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Definitions:

Actual Costs

The real financial expenditures that a company incurs, as opposed to estimated or budgeted costs, including expenses for materials, labor, and overhead.

Standard Rate

A predetermined cost or charge established for a particular good or service.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected (or standard) quantity, multiplied by the standard cost per unit.

Standard Quantity

The expected or budgeted quantity of materials, labor, or overhead needed for production, based on norms or standards.