Question

Which of the following statements is true if the number of units produced decreases?

a. The variable cost per unit decreases.
b. The total variable cost decreases.
c. The variable cost per unit increases.
d. The total variable cost remains constant.

Answer 1

When the number of units produced decreases, the total variable cost decreases.

Step-by-step explanation:

When the number of units produced decreases, the total variable cost decreases (option b). Variable costs are the costs that change with the level of production, such as raw materials and labor. As the number of units produced decreases, the amount of raw materials and labor required also decreases, resulting in a lower total variable cost. The variable cost per unit (option a) may remain the same or fluctuate depending on the specific costs involved, but the total variable cost will decrease.