Asked by Yanna Listana on Jul 27, 2024
Verified
Krista's dry-cleaning business incurs $900 per month in fixed costs.Last month her total output was 3,000 pounds of clothes.This month her total output fell to 2,700 pounds.This means her average fixed cost _____ by a little more than _____ cents.
A) fell;3.33
B) increased;3.33
C) fell;2.50
D) increased;2.50
Average Fixed Cost
The fixed costs of production divided by the quantity of output produced.
Total Output
The total quantity of goods or services produced by an individual, firm, industry, or economy.
Dry-Cleaning Business
A service-oriented business that cleans clothes, textiles, and garments using a chemical solvent rather than water.
- Evaluate the influence of different output levels on average total, variable, and fixed costs.
Verified Answer
MF
Mariana FonsecaAug 03, 2024
Final Answer :
B
Explanation :
Fixed costs remain constant regardless of the level of output. When output decreases, the average fixed cost per unit increases because the same amount of fixed costs is spread over fewer units. Last month, the average fixed cost was $900 / 3,000 = $0.30 per pound. This month, it is $900 / 2,700 = $0.333 per pound. The difference is more than $0.033 per pound, which is more than 3.33 cents.
Learning Objectives
- Evaluate the influence of different output levels on average total, variable, and fixed costs.
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