Question

If a firm's net income does not change as its volume changes, the firm('s)

a. must be in the service industry
b. must have no fixed costs
c. sales price must equal $0
d. sales price must equal its variable costs

Answer 1

If a firm's net income does not change as its volume changes, it means that the firm faces a perfectly elastic demand curve for its product. In order to earn a profit, the firm's total revenue must exceed its total costs.

Step-by-step explanation:

A firm's net income does not change as its volume changes when the firm faces a perfectly elastic demand curve for its product.

This means that buyers are willing to buy any number of units of output from the firm at the market price, allowing the firm to sell any number of units at exactly the same price. In order for a firm to earn a profit, its total revenue must exceed its total costs.