Explain These Basic Cost Concepts and How They Change as a Company

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The Answer is a. Total variable costs: These are costs that vary with the level of production. As a company produces more goods, total variable costs will increase because more materials and labor are needed to produce the additional units.

b. Average variable costs: This is the total variable cost divided by the quantity of goods produced. As production increases, average variable costs may decrease initially due to economies of scale, but eventually may start to increase as additional resources are needed to produce more goods.

c. Total fixed costs: These are costs that do not change with the level of production. As a company produces more goods, total fixed costs remain constant because they are not directly related to the quantity of goods produced.

d. Average fixed costs: This is the total fixed cost divided by the quantity of goods produced. As production increases, average fixed costs will decrease because the fixed costs are spread over a larger number of units.

e. Total costs: This is the sum of total variable costs and total fixed costs. As a company produces more goods, total costs will increase due to the increase in variable costs, while fixed costs remain constant.

f. Average total costs: This is the total cost divided by the quantity of goods produced. As production increases, average total costs may initially decrease due to economies of scale, but may eventually start to increase as additional resources are needed to produce more goods.

Explain These Basic Cost Concepts and How They Change as a Company

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Explain These Basic Cost Concepts and How They Change as a Company

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Correct Answer:Answered by ExamLex AIShow Answer

Correct Answer:
Answered by ExamLex AI