The rent for the campus store is a fixed cost as

output changes. The rent for the campus store is a fixed cost, as Robert must
pay that rent irrespective of how many pizzas Robert sells.
 Variable costs are not constant and do change with the level of output. Because
of this, variable expenses are often stated on a per unit basis. The variable cost
per pizza is $5. For every pizza Robert sells, Robert must spend $5.
 Price is how much Robert gets per unit sold. The price here is $10, as that is how
much Robert gets for every pizza he sells.
Abhijit Guha

2
Suppose we ask the question – assuming Robert sells 10 pizzas, how much profit
does Robert make?
Suppose we ask the question – for Robert, what is break-even number of pizzas?
Intuition:
 Roberts buys a pizza for $5 (VC), sells a pizza for $10 (PRICE), so Robert
makes $5 per pizza
 Robert has incurred rent of $20 (FC) for the store, he must pay this no matter
how many pizzas he sells
 If Robert sells 4 pizzas, he makes 4 x $5 = $20, and so he makes just enough
money to cover rent for the store
 Hence the break-even quantity here is 4
Abhijit Guha