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.

Question

Quizplus · Accepted Answer

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.

Amy Spends $5,000 on Remodeling a Storefront That She Then