When an entrepreneur produces only a few units of output, much of the cost of each unit must be used to pay fixed costs and, therefore, average cost is
A) high
B) low
C) zero

Question

Quizplus · Accepted Answer

When an entrepreneur produces only a few units of output, fixed costs like rent, interest on loans, insurance, salaries of permanent staff, etc. are spread over a small number of units. Therefore, each unit's average cost becomes high.

When an Entrepreneur Produces Only a Few Units of Output