Question

The cost of a single unit of production in excess of the breakeven point in units is:

a) its fixed cost and variable cost.
b) its fixed cost only
c) its variable cost only
d) none of the above

Answer 1

The cost of a single unit of production in excess of the breakeven point in units includes both the fixed cost and the variable cost.

Step-by-step explanation:

In a short-run perspective, the cost of a single unit of production in excess of the breakeven point in units includes both the fixed cost and the variable cost. Fixed costs are costs that a firm incurs before producing any output, such as rent, salaries, and insurance. Variable costs are costs that are directly tied to the act of producing, such as raw materials and labor.

For example, let's say a company has a fixed cost of $1000 per month and a variable cost of $10 per unit. If the breakeven point is 100 units, and the company produces 150 units, the cost of the additional 50 units would be $10 * 50 = $500, which is the variable cost. In addition, the company would still have the fixed cost of $1000. Therefore, the total cost of the additional 50 units would be $1000 + $500 = $1500.