Which of the Following Statements Is Correct

question 54

Multiple Choice

Which of the following statements is correct?

• A)Fixed cost per unit increase as activity increases.
• B)Fixed cost per unit decrease as activity increases.
• C)Fixed cost per unit stay the same as activity increases.
• D)Fixed cost per unit first increase,then decrease as activity increases.

---

Definitions:

Average Variable Cost

The total variable costs (costs that change with production levels) divided by the quantity of output produced.

Output

The total quantity of goods or services produced within a specific period by a firm or industry.

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additional output from each new unit of input will eventually decrease.

Variable Factors

Elements in production that can change in the short term, such as labor and raw materials, in contrast to fixed factors like capital.