ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Total fixed cost does not change when output changes.
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Fixed cost is paid for the use of fixed factors.
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Total fixed cost is $0 at output = 0,
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Average fixed cost fall as output rises.
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Detailed explanation-1: -Wages paid to workers however can vary as the number of workers increase or decrease. Hence it is not considered as a fixed cost.
Detailed explanation-2: -Fixed costs are always shown as the vertical intercept of the total cost curve; they are the costs incurred when output is zero, so there are no variable costs. You can see in the graph that once production starts, total costs and variable costs rise.
Detailed explanation-3: -Answer and Explanation: The correct answer is option B. Fixed costs are constant in total, and variable costs are constant per unit. Fixed cost remains fixed in total and do not change with the change in production, and the variable cost is fixed at per unit level, because for every unit variable cost is same.
Detailed explanation-4: -Raw material is a variable input, so its cost is a variable cost.