Select the Appropriate Cost Behaviour for the Following Costs Incurred

question 166

Multiple Choice

Select the appropriate cost behaviour for the following costs incurred by a bicycle manufacturer.
-Cost of transporting bicycles to retailer

• A)Variable
• B)Fixed

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Definitions:

Marginal External Cost

The additional cost incurred by society due to one more unit of a good or service being produced, that is not accounted for by the producer.

External Cost

A cost of a transaction that affects someone who is not directly involved in the transaction.

Profit Maximizing

A strategy or point at which a firm decides the price and output level that leads to the maximum profit.

MSB Curve

The Marginal Social Benefit curve, showing the extra benefit to society of producing one more unit of a good.