ECONOMICS

Detailed explanation-1: -Answer and Explanation: Answer: True: If sales price and fixed costs remain constant while variable costs per unit increase, the number of units needed to be sold to reach the break-even point increases. Explanation: The break-even point can be computed by dividing total fixed costs by the contribution margin per unit.

Detailed explanation-2: -A decrease in fixed cost decreases total cost and leaves marginal cost unchanged and leaves q* unchanged. Total cost is composed of both total fixed costs and total variable costs. Total variable costs vary with the level of production, while total fixed cost doesn’t vary and remains fixed.

Detailed explanation-3: -Variable Cost per unit decreases: The total cost line will decrease, as total Cost includes fixed Costs and variable Costs. As production increases, fixed cost per unit decreases, leading to a lower total cost relative to total production.

Detailed explanation-4: -Total fixed costs remain the same, within the relevant range. However, the fixed cost per unit decreases as production increases, because the same fixed costs are spread over more units. The following two charts depict this relationship between fixed costs and output volume.