Question

Within the relevant range, if there is a change in the level of the cost driver, then: A) total fixed costs will remain the same and total variable costs will change B) total fixed costs will change and total variable costs will remain the same C) total fixed costs and total variable costs will change D) total fixed costs and total variable costs will remain the same

Answer 1

Answer:

The answer,in this case would be option A) given in the answer choices or total fixed costs will remain the same and total variable costs will change.

Explanation:

• In Microeconomics or Production Economics,the total fixed cost basically refers to the cost or expense of the firm or company which does not change with any corresponding change in production or output level in the short run.Examples of fixed costs commonly include rent expenses,monthly utility bills,regular maintenance expenses,monthly water and energy expenses and so forth.
• On the other hand,total variables costs are the costs of expenses incurred by the company or firm that are directly related with the level of production or output and changes accordingly.Examples of total variable cost includes labor costs or expenses which vary according to the changes in the production or output level as the labor is the only variable input or factor of production in the short run.
• Therefore,any change in the total production cost in the short run would reflect the proportionate change in the total variable cost of production(labor expenses or labor wage) as the total fixed cost is already fixed or constant and does not depend on the volume or level or production or output.