If two firms have the same sales prices for their merchandise once fixed costs are covered, the firm with a higher variable cost rate will have:

Question

Quizplus · Accepted Answer

The firm with a higher variable cost rate will have smaller increases in profits as sales increase because they have to spend more on variable costs to produce more units, reducing the overall profit margin. On the other hand, the firm with a lower variable cost rate can produce more units and still maintain a higher profit margin.

If Two Firms Have the Same Sales Prices for Their