ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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be more profitable than a firm whose fixed costs are small relative to variable costs.
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produce in Stage 3 of the production function.
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produce durable goods rather than services.
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operate longer hours than a firm whose fixed costs are small relative to variable costs.
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Detailed explanation-1: -A company with greater fixed costs compared to variable costs may achieve higher margins as production increases since revenues increase but the costs will not. However, the margins may also reduce if production decreases.
Detailed explanation-2: -Fixed costs remain the same throughout a specific period. Variable costs can increase or decrease based on the output of the business. Examples of fixed costs include rent, taxes, and insurance. Examples of variable costs include credit card fees, direct labor, and commission.
Detailed explanation-3: -In the long run, firms operate at a very large scale and economies of scale operate in production. All the fixed costs incurred by firms in the short run become variable in the long run because there are no fixed factors of production in the long run. All factors are variable and so are all costs in the long run.
Detailed explanation-4: -Fixed costs do not change with increases/decreases in units of production volume, while variable costs fluctuate with the volume of units of production. Fixed and variable costs are key terms in managerial accounting, used in various forms of analysis of financial statements.