Why does a tuxedo for occasion cost $90 to rent per day while, a car valued at a higher price can be rented at only $40 per day? Why does a tuxedo for occasion cost $90 to rent per day while, a car valued at a higher price can be rented at only $40 per day? This is something that goes on almost everyday throughout the world. A Tuxedo can be bought on average for about $500. Yet the car that people are renting cost about $20,000. So why does the car, which has a higher initial cost for the supplier, cost less to rent for the renter than the tuxedo? It may be simpler than most people think. Rental companies have higher fixed cost than tuxedo companies but significantly lower variable cost. So when rental companies price their items they look at certain factors. The fixed cost is the initial amount they have to pay for the car, $20,000. Then they look at their variable costs. This consist of two major factors. One is the price they will have to pay to up keep their items, such as mechanic
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This note was uploaded on 03/28/2012 for the course MICRO 101 taught by Professor Blair during the Spring '12 term at Rutgers.