An insurance agent rents a building and has a three-year lease.An increase in the rent for the building increases the agent's
A) total cost and average variable cost.
B) total variable cost and average variable cost.
C) total fixed cost and total variable cost.
D) total fixed cost and average fixed cost.
E) total variable cost and total cost.

Question

Quizplus · Accepted Answer

An increase in rent for the building would only affect the total fixed cost and average fixed cost for the insurance agent, as rent is a fixed cost and does not change with the level of business activity. It would not affect the total variable cost or average variable cost, as those costs are related to the level of business activity (such as commission on sales or marketing expenses).

An Insurance Agent Rents a Building and Has a Three-Year