Question
A firm with higher operating leverage will have
(low/high) fixed costs relative to a firm with low operating leverage.
(low/high) fixed costs relative to a firm with low operating leverage.
Answers
GPT-4o mini
A firm with higher operating leverage will have **high** fixed costs relative to a firm with low operating leverage.
Operating leverage refers to the degree to which a firm uses fixed costs in its operations. A firm with high operating leverage has a larger proportion of fixed costs compared to variable costs, meaning its costs do not change much with the level of production. In contrast, a firm with low operating leverage has a higher proportion of variable costs, which fluctuate more directly with production levels.
Operating leverage refers to the degree to which a firm uses fixed costs in its operations. A firm with high operating leverage has a larger proportion of fixed costs compared to variable costs, meaning its costs do not change much with the level of production. In contrast, a firm with low operating leverage has a higher proportion of variable costs, which fluctuate more directly with production levels.