Both Jill and John own toothpick factories.Jill's factory has low fixed costs and high variable costs.John's factory has high fixed costs and low variable costs.Currently each factory is producing 1,000 boxes of toothpicks at the same total cost.Complete the following statement with the correct answer.If each produces
A)more,their costs will be equal.
B)less,their costs will be equal.
C)less,the costs of Jill's factory will exceed those of John's factory.
D)more,the costs of Jill's factory will exceed those of John's factory.

Question

Quizplus · Accepted Answer

Since Jill's factory has low fixed costs and high variable costs, it means that the cost per unit increases with the production of more units. On the other hand, John’s factory has high fixed costs, so the cost per unit decreases with the production of more units.

Therefore, if both factories produce more than 1,000 boxes of toothpicks, the cost per unit in Jill’s factory will exceed that of John’s factory. Hence, the correct choice is D.

Both Jill and John Own Toothpick Factories