Which of the following expenses is most likely to change based on how much you drive your car?

• A. Car loan monthly payment
• B. Gasoline costs
• C. Annual vehicle registration fee
• D. Monthly car insurance premium

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the difference between fixed and variable costs. Fixed costs remain constant regardless of usage, while variable costs change with the level of usage or activity.
2. Step 2: Identify each expense type: Car loan monthly payment, annual vehicle registration fee, and monthly car insurance premium are typically fixed costs because they do not vary with how much you drive.
3. Step 3: Recognize that gasoline costs are variable costs because the amount of gasoline you use depends directly on how much you drive your car.
4. Step 4: Conclude that among the given options, gasoline costs are the expense most likely to change based on driving frequency or distance.
5. Step 5: Summarize that understanding the nature of costs (fixed vs. variable) helps in analyzing how expenses respond to changes in activity levels, such as driving more or less.