ECO182 - Lecture 9 Review

# ECO182 - Lecture 9 Review - Fixed versus variable costs You...

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Fixed versus variable costs You paid \$ 20,000 to buy a new car. In the first year you used it to generate 10,000 miles of travel. It costs \$ 0.20 per mile to operate. It cost \$ 1000 to insure it in the first year. A. The fixed cost is \$ 20,000 + 0.20*10,000 + \$1000 A. The fixed cost is \$ 21,000 and the variable cost is \$2,000 per year C. It is all variable cost. D. In this problem there is a sunk cost of \$ 20,000 but it is not fixed.

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You paid \$ 20,000 to buy a new car. In the first year you used it to generate 10,000 miles of travel. It costs \$ 0.20 per mile to operate. It cost \$ 1000 to insure it in the first year . A. The average cost per mile is \$ 2.30/mile and the marginal cost is \$ 0.20/mile B. The average and marginal costs are both \$ 0.20/mile C. The more you drive the car the lower marginal cost will become. D. The more you drive the car, the higher average cost will become.
An accountant has 100 customers and each pays him \$ 2,000 each year. The accountant rents his office for \$

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## This note was uploaded on 10/10/2010 for the course ECO 182 taught by Professor Morgan during the Spring '08 term at SUNY Buffalo.

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ECO182 - Lecture 9 Review - Fixed versus variable costs You...

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