If a firm has low fixed costs relative to all other firms in the same industry, a large change in sales volume (either up or down) would have:

Question

Quizplus · Accepted Answer

When a firm has low fixed costs relative to other firms, a large change in sales volume results in a smaller change in EBIT for the firm compared to other firms. This is because fixed costs remain relatively constant, while variable costs increase or decrease with changes in sales volume. Therefore, a firm with low fixed costs will have a smaller change in EBIT for a given change in sales volume, making option A the correct answer.

If a Firm Has Low Fixed Costs Relative to All