Practice assessment 2 question 6

cjfogg

The final multiple choice question in part b is:

The unit cost reduces but at a lower rate than a reduction in output.

The answer is semi-variable. I don’t feel that I fully understand the question. The reduction in output part is confusing me. Why is the answer semi-variable rather than fixed? Thanks.

Tabitha005

Sorry, no help here as I didn't understand the question, either! Just adding my voice to the request for clarification!

Pian32

The question doesn't seem correct to me. As the unit cost would increase on both fixed costs and semi variable costs when you reduce output. For this I'd take that the rate of change is different to the rate of change in output and therefore can only be semi variable.

If the cost was fixed it would be a proportional change on variable it wouldn't change at all.