Expense a Is a Fixed Cost;expense B Is a Variable

question 61

Multiple Choice

Expense A is a fixed cost;expense B is a variable cost.During the current year,the activity level has increased but is still within the relevant range.In terms of cost per unit of activity,you would expect which of the following statements to be true?

• A) Expense A has remained unchanged.
• B) Expense B has decreased.
• C) Expense A has decreased.
• D) Expense B has increaseD.

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Definitions:

Economic Profit

The profit made by a firm after accounting for both its explicit (out-of-pocket) and implicit (opportunity) costs, providing a comprehensive measure of true profitability.

Wage Rate

The wage rate refers to the standardized amount of compensation a worker receives per unit of time, such as an hour or year, for their labor.

Variable Input

A variable input is a resource or factor of production whose quantity can be changed easily by a firm in response to changes in production volume or demand, such as labor or raw materials.

Marginal Product

The extra production achieved by the use of an extra unit of a specific input while keeping other inputs unchanged.