Questions: Describe what fixed costs and marginal costs mean to a company. Choose the correct answer below. A. Fixed cost is the constant for a particular product and does not change as more items are made. Marginal cost is the rate of change of cost C(x) at the level of production x and is equal to the slope of the cost function at x. B. Fixed cost is the rate of change of cost C(x) at the level of production x and is equal to the slope of the cost function at x. Marginal cost is the constant for a particular product and does not change as more items are made. C. The number of units at which revenue just equals cost is the fixed cost. Marginal cost is the constant for a particular product and does not change as more items are made. D. Fixed cost is the constant for a particular product and does not change as more items are made. The number of units at which revenue just equals cost is the marginal cost.

The answer is A: Fixed cost is the constant for a particular product and does not change as more items are made. Marginal cost is the rate of change of cost \(C(x)\) at the level of production \(x\) and is equal to the slope of the cost function at \(x\).

Explanation:

A. Correct. Fixed costs are expenses that do not change with the level of production or sales, such as rent, salaries, and insurance. They remain constant regardless of how many units are produced. Marginal cost, on the other hand, refers to the additional cost incurred by producing one more unit of a product. It is the derivative of the total cost function with respect to quantity, representing the slope of the cost function at a given level of production.

B. Incorrect. This option reverses the definitions of fixed cost and marginal cost. Fixed cost is not the rate of change of cost, and marginal cost is not a constant.

C. Incorrect. The number of units at which revenue equals cost is known as the break-even point, not fixed cost. Marginal cost is not a constant; it varies with the level of production.

D. Incorrect. While the definition of fixed cost is correct, the number of units at which revenue equals cost is the break-even point, not marginal cost. Marginal cost is related to the change in cost with respect to production, not the break-even point.