You are a newspaper publisher. you are in the middle of a one-year rental contract for your factory that requires you to pay $700,000 per month, and you have contractual labor obligations of $1,250,000 per month that you can’t get out of. you also have a marginal printing cost of $0.35 per paper as well as a marginal delivery cost of $0.10 per paper. if sales fall by 20 percent from 1,000,000 papers per month to 800,000 papers per month, what happens to the afc per paper?

The average fixed cost per newspaper increased from $1.95 to $2.44

Explanation:

To determine the average fixed costs (AFC) we must first determine the total fixed costs:

Total fixed costs = rent expense + fixed labor = $700,000 + $1,250,000

Total fixed costs = $1,950,000

When the total production was 1,000,000 newspapers per month, the AFC was = $1,950,000 / 1,000,000 newspapers = $1.95 per newspaper

When the total production decreased to 800,000 newspapers per month, the new AFC was = $1,950,000 / 800,000 newspapers = $2.44 per newspaper

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return