Answer to Question #203724 in Macroeconomics for Rabia Javed

Question

1.     The dean of a college faces the following costs: graders, faculty, classroom space, and chalk. Of these costs, which are likely to be variable in the long run?

 

2.     Suppose that you and your roommate have started a Bread delivery service on campus.

a.     List some of your fixed costs and describe why they are fixed.

b.     List some of your variable costs and describe why they are variable.

Answer 1

1.    The dean of a college faces the following costs: graders, faculty, classroom space, and chalk. Of these costs, which are likely to be variable in the long run?

Chalk and graders are likely to be variable in the long run. They will be both depending on the number of students admitted.

2.    Suppose that you and your roommate have started a Bread delivery service on campus.

a.    List some of your fixed costs and describe why they are fixed.

Some of the fixed cost of starting a bread delivery services on campus is the delivery car, maintenance and rent of headquarters, and administrative salaries. These are fixed costs because we have to pay the same amount regardless of the amount of product we sell in the market in a single period. Fixed costs do not vary with sales volume.

b.    List some of your variable costs and describe why they are variable.

The variable cost of starting a bread service includes the amount of bread produced; the bags and crates the loaves of bread goes in, delivery boy wages, and marketing expenses. These are variable costs that depend directly on the quantity of the product produced. As sales go up, so do variable costs and vice versa.