Question

As a firm produces more units of a good, its
a.
fixed costs remain constant in the short run and its variable costs rise.
b.
variable costs decline in the short run and its fixed costs rise.
c.
fixed and variable costs remain constant in the short run.
d.
variable costs remain constant in the short run and its fixed costs fall.
e.
none of the above

Answer 1

Answer:

a.

fixed costs remain constant in the short run and its variable costs rise.

Explanation:

Fixed costs are the expenses that do not vary with the production level in a period. Fixed costs will, therefore, remain constant in the period regardless of the production level. Examples of fixed costs include rents, depreciation, and administrative salaries.

Variable costs vary with the output level. They are the expenses that increase as production increase and decrease as output decreases. In other words, variable expenses are directly proportional to the production level. Examples of variable costs include packaging and raw materials.