Angel Rodriguez pulls up in his 24-foot panel truck in front of Sezz Medi Brick Oven Pizza in Upper Manhattan. Even though it's the middle of the summer, he's delivering- firewood. He says even though fuel costs have doubled in the past year, it's still worth the premium he gets delivering ash and cherry to the captive and growing market in NYC. Which of the following statements is TRUE about short run costs for Angel?
A) His truck is a fixed cost and gasoline is a variable cost.
B) His truck is a variable cost and gasoline is a fixed cost.
C) Both his truck and gasoline is a variable cost.
D) Neither his truck nor gasoline is a variable cost.

Question

Quizplus · Accepted Answer

In the short run, the truck is a fixed cost because it is a capital investment that does not change with the level of output. Gasoline is a variable cost because it varies with the amount of driving Angel does for deliveries.

Angel Rodriguez Pulls Up in His 24-Foot Panel Truck in Front