Asked by Ariel Kirkpatrick on Jun 28, 2024
Verified
Refer to Figure 9.1. If this farmer maximizes profits, his average fixed costs will be
A) $2.
B) $7.
C) $11.
D) $24.
Fixed Costs
Costs that do not change with the level of output produced, such as rent, salaries, or insurance expenses.
Maximizing Profits
The process of increasing the difference between revenue and costs to achieve the highest possible financial gain.
- Gain insight into the determination of fixed and variable expenditures within business environments.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
A
Explanation :
Without access to Figure 9.1, we can deduce the correct answer based on the principle that average fixed costs (AFC) decrease as output increases. Since the question implies the farmer is maximizing profits, he is likely operating at a higher level of output. Among the given options, $2 is the lowest AFC, which aligns with the concept of profit maximization leading to higher output and thus lower AFC.
Learning Objectives
- Gain insight into the determination of fixed and variable expenditures within business environments.
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