Jane Westerlund owns a picture-framing shop, The Caplow Co. The average price she receives for a picture she frames for a customer is $120. This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labour involved. She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary. Assuming everything else stays the same, if Jane Westerlund increased the average price charged for a framed picture, in a break-even chart this would cause the slope of the total revenue curve to _________and the break-even quantity to __________.

Question

Quizplus · Accepted Answer

Increasing the average price charged for a framed picture would increase the slope of the total revenue curve because revenue would increase more rapidly with each unit sold. This, in turn, would decrease the break-even quantity because higher revenue per unit means fewer units need to be sold to cover the fixed and variable costs.

Jane Westerlund Owns a Picture-Framing Shop, the Caplow Co