Operating Leverage Predicts the Effects That Fixed Costs Have on Operating

question 256

Multiple Choice

Operating leverage predicts the effects that fixed costs have on operating income when ________.

• A) production is discontinued
• B) there are no sales returns
• C) variable costs change
• D) sales volume changes

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Definitions:

Economic Profits

The disparity between a company's overall income and its comprehensive economic expenses, accounting for both direct (explicit) and indirect (implicit) costs.

Purely Competitive

A market structure characterized by many sellers offering identical products, leading to no single seller influencing the market price.

Market Price

The present cost at which a service or asset is available for purchase or sale in a specific market.

Decreasing-Cost Industry

An industry where production costs decrease as the industry grows, often due to economies of scale.