Both Stan and Kyle own potato chip factories. Stan's factory has low fixed costs and high variable costs. Kyle's factory has high fixed costs and low variable costs. Currently, each factory is producing 5,000 bags of potato chips at the same total cost. Complete the following statement with the correct answer. If each produces
A) less, their costs will be equal.
B) more, their costs will be equal.
C) more, the costs of Kyle's factory will exceed those of Stan's factory.
D) less, the costs of Kyle's factory will exceed those of Stan's factory.

Question

Quizplus · Accepted Answer

If they produce less, Kyle's factory with high fixed costs will have higher costs per unit due to the spread of fixed costs over fewer units, while Stan's factory with low fixed costs will have lower costs per unit.

Both Stan and Kyle Own Potato Chip Factories