Question

Assume employee salaries are determined before the beginning of the year. From the point of view of the business owner, employee salaries for the year are______costs.

O marginal
O average
O foxed
O variable

Answer 1

Employee salaries set at the beginning of the year are considered fixed costs as they do not change with production levels.

Step-by-step explanation:

From the point of view of a business owner, employee salaries determined before the beginning of the year are fixed costs. These are costs that do not change with the level of output of the business and must be incurred before any production takes place. Fixed costs contrast with variable costs, which change with the level of production. For instance, in a barber shop scenario, the fixed costs might include rent and equipment, while variable costs are associated with hiring barbers, which depend on the volume of haircuts given.

The concept of marginal costs is different; it refers to the cost of producing one additional unit of output, and typically increases as output rises due to diminishing marginal returns. Therefore, assuming employee salaries are fixed at the beginning of the year, they are not considered marginal costs because they do not vary with each additional unit of production.