Asked by PERLA MENDIOLA on Jul 07, 2024
Verified
Cindy operates Birds-R-Us,a small store manufacturing and selling 100 bird feeders per month.Cindy's monthly total fixed costs are $500,and her monthly total variable costs are $2,500.If for some reason Cindy's fixed cost fell to $400,then her _____ costs would _____.
A) average fixed;increase
B) average total;decrease
C) marginal;decrease
D) average variable;decrease
Total Fixed Costs
The total of all expenses that do not change with the amount of production or output.
Total Variable Costs
The sum of all costs that change with the level of output, such as materials and labor directly involved in production.
Average Fixed Cost
The total fixed costs of production divided by the quantity of output produced.
- Understand the effects of changes in fixed costs on average total and variable costs.
Verified Answer
GA
Gabbi AguayoJul 08, 2024
Final Answer :
B
Explanation :
With a decrease in fixed costs, the average total cost per unit would decrease because the total cost (fixed plus variable) to produce the same quantity of goods has decreased. Fixed costs are spread out over the units produced, so a decrease in fixed costs lowers the cost per unit. Marginal costs and average variable costs are not directly affected by changes in fixed costs.
Learning Objectives
- Understand the effects of changes in fixed costs on average total and variable costs.