Which of the Following Is Not One of the Assumptions

question 82

Multiple Choice

Which of the following is not one of the assumptions underlying cost-volume-profit analysis?

• A) Costs are linear.
• B) Production equals sales.
• C) All costs can be segregated into fixed and variable components.
• D) The selling price increases or decreases with changes in sales volume.

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Definitions:

Market Equilibrium

The state in which market supply and demand balance each other, and, as a result, prices become stable.

Economic Profit

The difference between a firm's total revenue and its total costs, including both explicit and implicit costs, reflecting the true profitability of the firm.

Economic Profit

The gap between the total income a company makes and all of its expenses, covering both direct and indirect costs.

Optimal Output

The level of production that maximizes a firm's profits, where marginal revenue equals marginal cost.