Exhibit 7-5 In Exhibit 7-5, what is variable cost when no output is being produced?
A)$0
B)$10
C)infinity
D)it is impossible to calculate variable cost unless we know the daily wage
E)it is impossible to calculate variable cost unless we know fixed cost at Q = 0

Question

Exhibit 7-5  In Exhibit 7-5, what is variable cost when no output is being produced?
A)$0 
B)$10 
C)infinity 
D)it is impossible to calculate variable cost unless we know the daily wage 
E)it is impossible to calculate variable cost unless we know fixed cost at Q = 0

Quizplus · Accepted Answer

Variable cost is the cost that varies with the level of output, and in the exhibit, it is given that the variable cost is $10 per unit. When no output is being produced, the level of output is 0, which means there are no variable costs. Therefore, the variable cost is $0 when no output is being produced.

Exhibit 7-5 in Exhibit 7-5, What Is Variable Cost