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You own Drip Painting company, which employs several painters. Your newest employee says "Now that we've bought drop cloths paint rollers, and other supplies, we should maximize the number of paint jobs we do that way we'll spread those fxed costs over more production". You reply.

1. "Nope, average fixed costs don't fall as you produce more."
2. "Hang on, doing more paint jobs also involves hiring more painters - that variable cost is actually much bigger than the fixed cost of equipment.
3. "You're confusing supply and demand."
4. "You're right sounds great!"

Respuesta :

"Hang on, doing more paint jobs also involves hiring more painters - that variable cost is actually much bigger than the fixed cost of equipment.

Answer: Option 2.

Explanation:

In the production process of a company or an organisation, there are certain types of costs that the company or the organisation has to bear. The types of costs are average costs and the fixed cost.

In the case of average cost, with the increase in the production made by the organisation, the average costs also increase. But in the case of fixed cost, with the increase in the production of the firm, the fixed cost does not increase or change. It remains the same. That is why it is known as the fixed cost.

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