Question

Try to anser each one in 2 sentences

Think of a business you may be interested in starting:

1. What kind of resources would you need to acquire to operate this business?
2. Which costs are implicit costs?
3. Which resources are fixed and which are variable?
4. Explain the difference between fixed and variable costs for this business.
5. Explain how this business could experience diminishing marginal returns in the short run.
6. Would this business experience economies of scale?

Answer 1

Answer:-

I will like to open a confectionary.

1. I have to rent a shop, buy a display table, hire some workers, make some advertisement and arrange for electricity, gas equipment, and other utilities.
2. I was doing a job, so I have to leave my job to open the shop, so this is an implicit cost,
3. Here buying a table, making advertisement are fixed costs whereas paying the worker, renting are variable costs.
4. Variable costs vary with the amount produced. Fixed costs remain the same, no matter how much output a company produces. A variable cost is a company's cost that is associated with the number of goods or services it produces. A company's variable cost increases and decreases with the production volume.
5. Businesses can experience diminishing marginal return as space is confined, thus increasing workers or spending more on an advertisement will not benefit anymore.
6. Economies of scale are the cost advantage of business expansion. As some firms grow in size their unit costs begin to fall because of: Purchasing economies when large businesses often receive a discount because they are buying in bulk.