QuestionWhich cost factor increased due to Harry raising employee wages? A. fixed cost B. marginal cost C. sunk cost
Studdy Solution
STEP 1
Assumptions1. The wages of employees are considered a cost of production.
. The increase in wages has led to an increase in production costs.
3. We need to identify which type of cost the salary represents.
STEP 2
Let's understand the definitions of the given optionsA. Fixed costs are costs that do not change with the level of output. They are the costs that a company incurs even if it is not producing anything.
B. Marginal costs are the cost of producing one additional unit of a good or service.
C.unk costs are costs that have already been incurred and cannot be recovered.
STEP 3
Now, let's analyze which of these costs the salary falls under.
The salary of employees is a cost that the company has to bear regardless of the level of output. The company has to pay the salaries even if it is not producing anything. Therefore, it is a fixed cost.
The salary of employees does not change with the production of one additional unit of a good or service. Therefore, it is not a marginal cost.
The salary of employees is a cost that the company can avoid in the future by not hiring employees. Therefore, it is not a sunk cost.
STEP 4
Based on the above analysis, we can conclude that the salary of employees is a fixed cost.
So, the correct answer is A. Fixed cost.
Was this helpful?
