Which of the following statements are true?
I. Profit equals revenue minus cost.
II. Average cost is total cost divided by the number of units.
III. At the break-even point, revenue equals cost.
IV. The fixed cost changes as the output changes.

All four: I, II, III and IVCorrect answerYour answerI, II and III onlyCorrect answerYour answerI and II onlyCorrect answerYour answerII and III onlyCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

I, II and III are the definitions of profit, average cost and break-even.
IV is false: the fixed cost, such as rent, stays the same whatever the output; it is the variable cost that changes.

Concept: Cost terms
Typical timeTypical: 120 s
Your timeYours: —

The rule this testsCost, revenue and profit functions

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Ten questions from Rate of Change, Marginal Cost & Revenue, at your own pace.

Which of the following statements are true?I. Profit equals revenue minus cost.II. Average cost is total cost divided by the number of units.III. At the break-even point, revenue equals cost.IV. The fixed cost changes as the output changes.

Explanation

Which of the following statements are true?
I. Profit equals revenue minus cost.
II. Average cost is total cost divided by the number of units.
III. At the break-even point, revenue equals cost.
IV. The fixed cost changes as the output changes.