Question

The distinction drawn between fixed and variable costs is based on whether the ______________.

• A. cost can or cannot be changed during the life of the plant
• B. costs are or are not legally contracted, hence, unchangeable.
• C. costs do not enter the calculation of total costs
• D. costs do or do not vary with the output produced in the short run

Answer 1

Answer: (D)

costs do or do not vary with the output produced in the short run

The fixed cost do not vary with the output, while variable costs vary with the output. This serves as the main distinction between the fixed and the variable costs.