Which term describes expenses that increase with the quantity of output produced?

Which term describes expenses that increase with the quantity of output produced?

• A. Fixed Costs
• B. Variable Costs
• C. Sunk Costs
• D. Marginal Costs

Answer: (B)

This question tests how costs behave as production changes. Costs that change in direct proportion to how much you produce are called variable costs. They rise as output increases because you need more inputs like raw materials, direct labor, and energy per additional unit. Fixed costs, by contrast, stay the same regardless of production level, such as rent or certain salaries. Sunk costs are money already spent and not recoverable, so they don’t vary with current output. Marginal cost refers to the cost of producing one more unit, an incremental measure, not the total costs that grow with volume. So the term that describes expenses that increase with the quantity produced is variable costs.

This question tests how costs behave as production changes. Costs that change in direct proportion to how much you produce are called variable costs. They rise as output increases because you need more inputs like raw materials, direct labor, and energy per additional unit. Fixed costs, by contrast, stay the same regardless of production level, such as rent or certain salaries. Sunk costs are money already spent and not recoverable, so they don’t vary with current output. Marginal cost refers to the cost of producing one more unit, an incremental measure, not the total costs that grow with volume. So the term that describes expenses that increase with the quantity produced is variable costs.