Economics For Healthcare Managers
4th Edition
ISBN: 9781640550483
Author: Robert H. Lee
Publisher: Health Administration Pr
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Question
Chapter 5, Problem 1E
To determine
Explain the importance of distinguishion between fixed and variable costs.
Expert Solution & Answer
Explanation of Solution
The earning and income of a company will be affected by fixed and variable costs. Individuals distinguish between fixed and variable costs for the same purpose. That is, to clearly calculate the earnings and income of a company, individuals will distinguish between fixed and variable costs. Fixed cost is the cost that will remain constant and known as the initial investment or spending of a firm to start the business. The variable cost includes all expenditures of the company, and it will vary with varying production. For a clear calculation of earnings and losses, individuals will distinguish between fixed and variable cost.
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- Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?arrow_forwardA common name for fixed cost is overhead. If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is 1,000. What does the average fixed cost curve look like? Use your response to explain what spreading the overhead means.arrow_forwardWhat shapes would you generally expect each of the following cost curves to have: fixed costs, variable costs, marginal costs, average total costs, and average variable costs?arrow_forward
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