Both Kate and John own saltwater taffy factories. Kate'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 taffy at the same total cost. Complete the following statement with the correct answer. If each produces
A) less, their costs will be equal.
B) more, their costs will be equal.
C) more, the costs of Kate's factory will exceed those of John's factory.
D) less, the costs of Kate's factory will exceed those of John's factory.

Question

Quizplus · Accepted Answer

Kate's factory has high variable costs, meaning the cost per additional unit is high. As production increases, her total costs will rise more sharply than John's, whose factory has low variable costs. Thus, if they produce more, the costs at Kate's factory will exceed those at John's factory.

Both Kate and John Own Saltwater Taffy Factories