Jim runs a nursery. Identify the following costs he faces as fixed costs, average fixed costs, variable costs, average variable costs, total costs, average total costs, or marginal costs:

a) The rent he pays on his greenhouse in the short run

b) The rent he pays on his greenhouse in the long run

c) the cost of soil, water, and seeds in the short run

d) the per-unit cost of producing a nursery plant in the short run

e) the opportunity cost of shutting the nursery down and not producing any plants in the short run

Solutions

Expert Solution

a) fixed cost

rent he has to pay whether he is producing or not..in short run he can't avoid this cost

b) variable cost = total cost

in long run there is no fixed cost. due to time availability he can decide freely whether to use green house and pay rent or else don't use green house and don't pay for it

ans c)

variable cost

usage of soil , water and seeds in short run depend on how much to produce

ans d) Average Total cost

Average Total cost = average variable cost + average fixed cost= per unit cost of producing

ans e) FIXED cost

in short run, even if u don't produce than also u have to bear opportunity cost = fixed cost

Rahul Sunny answered 1 year ago

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