Total cost can be divided into two types of costs:
A)fixed costs and variable costs.
B)fixed costs and marginal costs.
C)variable costs and marginal costs.
D)average costs and marginal costs.

Question

Quizplus · Accepted Answer

Total cost can be divided into fixed costs and variable costs. Fixed costs are the costs that do not change with the level of output, while variable costs are the costs that change with the level of output. The distinction between fixed and variable costs is important for businesses to understand as it helps them to make decisions regarding pricing, profitability, and long-term planning. Option B is incorrect as marginal cost is not a type of cost, but a concept that refers to the cost of producing one more unit. Option C is incorrect as variable costs are already covered under option A. Option D is incorrect as average cost is a derived concept that is calculated by dividing total cost by the quantity produced.

Total Cost Can Be Divided into Two Types of Costs