If production increases by 20%,total variable cost will:
A) decrease by 20%.
B) increase by 20%.
C) increase by more than 20%.
D) remain the same.

Question

Quizplus · Accepted Answer

Total variable cost will increase by the same percentage as the increase in production. Therefore, if production increases by 20%, the total variable cost will also increase by 20%. Option A is incorrect because a decrease in production would lead to a decrease in total variable cost but an increase in production will lead to an increase in total variable costs. Option C is incorrect because a production increase of 20% will result only in a 20% increase in variable costs, not more. Option D is incorrect because an increase in production will inevitably lead to an increase in variable cost.

If Production Increases by 20%,total Variable Cost Will