Question

Mini owns a specialty yarn shop but she rents the space for her shop. of mini's landlord raises her rent which of the following will be affected by this increase in rent?

A. Marginal costs

B. Average Total costs

C. Average Variable cost

which of the following factors has the largest impact on the price elasticity of supply?

A. the number of available substitutes

B. the amount of time the producer has to adjust the inputs used in production and the level of output produced.

C. whether or not the good is a necessity

d. the cost of the labor used to produce the product or service.

Answer 1

After an increase in rent which is a fixed cost and is unaffected by the level of output, the Average total cost will increase (ATC). The correct option is C.

The cost of the labor used to produce will affect the supply as with an increase in cost, the profitability will go down and thus the supplier will be ready to market less at current price. Similarly with an increase in cost of labor or an input, the profitability rises and so the supply. The correct option is D.