- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 5. Company Analysis: Past and Present
- Subject 4. Operating Profitability and Working Capital Analysis
CFA Practice Question
In the long run, ______
II. fixed costs are always greater than variable costs.
III. fixed costs equal variable costs.
IV. costs are increased but remain in the same proportion as in the short run.
V. costs are rising.
I. no costs are fixed.
II. fixed costs are always greater than variable costs.
III. fixed costs equal variable costs.
IV. costs are increased but remain in the same proportion as in the short run.
V. costs are rising.
Correct Answer: I
In the long run, all inputs are variable, so no costs are fixed.
User Contributed Comments 5
| User | Comment |
|---|---|
| jasonkwk | why III is wrong? |
| Bududeen | Because there are no fixed costs in the long run |
| schweitzdm | III tricked me as well. Good point @Budu. |
| fangluez | In the text, "in the long-run, all resources used by the firm are variable". |
| choas69 | thus we have economies of scale theory |