If Sales Price and Variable Cost Remain Constant and Fixed

question 69

Multiple Choice

If sales price and variable cost remain constant and fixed costs decrease,contribution margin will

• A)Increase.
• B)Decrease.
• C)Remain the same.
• D)Vary,depending on the circumstances.

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Definitions:

Average Total Cost

The total cost to produce a given quantity of output divided by the quantity of output produced; it includes all opportunity costs.

Diminishing Marginal Returns

Refers to a point in production where adding an additional factor of production results in a smaller increase in output.

Average Variable Costs

The total variable costs divided by the quantity of output produced, reflecting the average cost of producing each unit.

Average Fixed Costs

Costs in production that are stable and do not vary with the amount of output, divided by the quantity of goods produced.