Final answer:
Advertising is typically a fixed cost, while sales commissions are variable costs. Cost behavior curves for fixed, variable, and marginal costs have distinctive shapes and are important in business decision-making.
Production technology refers to the methods used to produce goods and services.
Step-by-step explanation:
The typical cost behavior of advertising can usually be categorized as a fixed cost since a company often spends a set amount on advertising campaigns regardless of the level of sales. However, this can vary depending on the nature of the campaign.
For sales commissions, they are typically considered to be variable costs as they fluctuate with the volume of sales. Salespeople are often compensated with a commission that is a percentage of the sales they generate, which means the more they sell, the higher the costs for the business.
- Fixed costs are constant in total and do not change with the level of production, represented by a horizontal line.
- Variable costs change directly with the level of production, usually represented by a line that begins at the origin and moves upwards.
- Marginal costs represent the additional cost of producing one more unit, which can vary but typically has a U-shaped curve due to increasing and then decreasing marginal returns.
- Average total costs and average variable costs are calculated per unit and tend to have a U-shaped curve because they initially decrease due to spreading the fixed costs over more units and then increase due to rising variable costs.
Production technology refers to the methods and processes used in the production of goods and services. It influences the costs and efficiency of production.