Krista's dry-cleaning business incurs $900 per month in fixed costs. Last month her total output was 3,000 pounds of clothes. This month her total output fell to 2,700 pounds. This means her average fixed cost _____ by a little more than _____.

Question

Quizplus · Accepted Answer

Average fixed cost is calculated by dividing total fixed costs by the quantity of output. Last month, the average fixed cost was $900/3000 = $0.30 per pound. This month, it is $900/2700 = $0.3333 per pound. The average fixed cost increased by $0.0333, or 3.33 cents.

Krista's Dry-Cleaning Business Incurs $900 Per Month in Fixed Costs