Asked by Carlos Iturralde on Jun 26, 2024
Verified
Amy spends $5,000 on remodeling a storefront that she then opens as a take-out deli. Business has not been very successful, and she needs an additional $1,000 to keep the deli open. Which of the following is true?
A) The $5,000 Amy spent on remodeling represents a part of the total variable cost of her business.
B) The $5,000 Amy spent is a fixed cost of her business.
C) The $1,000 represents her marginal costs of production.
D) The $1,000 Amy needs to keep the deli open represents her total fixed costs.
Fixed Cost
Any cost that does not depend on the firms’ level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run.
Marginal Costs
Marginal Costs involve the additional expenses incurred from the production of one extra unit of a product or service.
Total Variable Cost
the sum of all costs that vary with the level of production, such as materials and labor directly involved in manufacturing.
- Delve into the study of fixed, variable, and aggregate financial obligations.
Verified Answer
AS
ariel stithJul 02, 2024
Final Answer :
B
Explanation :
CB) The $5,000 Amy spent on remodeling is a fixed cost because it does not change with the level of output or sales. It's a one-time expense that Amy will incur regardless of how many customers she serves.C) The additional $1,000 Amy needs to keep the deli open can be considered her marginal cost because it represents the cost of producing one more unit of output, in this case, keeping the deli operational for an additional period.
Learning Objectives
- Delve into the study of fixed, variable, and aggregate financial obligations.