When Average Total Cost Is Decreasing as Output Expands

question 51

Multiple Choice

When average total cost is decreasing as output expands:

• A)average fixed cost must be increasing.
• B)total fixed costs must be increasing.
• C)average variable cost must be falling.
• D)marginal cost must be greater than average total cost.
• E)marginal cost must be less than average total cost.

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Definitions:

Vertical Analysis

A technique for analyzing financial statements where every item under the three key account categories (assets, liabilities, and equity) on a balance sheet is shown as a percentage of the total for each category.

Operating Expenses

Costs related to the operation of a business, excluding the cost of goods sold, financing costs, and taxes.

Net Sales

The total income generated from sales by a firm, after reducing it for returns, discounts, and allowances due to damaged or absent goods.

Inventory Turnover

A proportion indicating the frequency at which a company's stock is sold and replenished during a given timeframe.