Because Variable Costs Are Assumed to Change in Constant Proportion

question 37

True/False

Because variable costs are assumed to change in constant proportion with changes in the activity level,the graph of the variable costs when plotted against the activity level appears as a circle.

---

Definitions:

Aggregate Supply Curve

A graph that shows the relationship between the overall price level in an economy and the total output produced by firms.

Potential Real GDP

The highest level of gross domestic product (GDP) that could be achieved if an economy operates at full employment.

Aggregate Demand Curve

A graphical representation showing the relationship between the overall price level and the total demand for all goods and services in an economy.

Quantity of Output

The total amount of goods or services produced by a company, sector, or economy within a specific period.