I calculated my answers wrong and I still can not figure the
I calculated my answers wrong and I still can not figure them out. I just need help with the blanks that have ? marks. thank you
You are a newspaper publisher. You are in the middle of a one-year rental contract for your factory that requires you to pay $500,000 per month, and you have contractual labor obligations of $1,250,000 per month that you can’t get out of. You also have a marginal printing cost of $0.25 per paper as well as a marginal delivery cost of $0.10 per paper.
If sales fall by 20 percent from 1,000,000 papers per month to 800,000 papers per month, what happens to the AFC per paper?
Solution
AFC per paper rises from $1.75 per paper to $ 2.19 per paper. (Explanation: (500000+1250000)/1000000)
MC does not change
The amount increases from $2.10 per paper to $2.54 per paper. Explanation: Total costs= 1,750,000 + 0.35*800,000= $2,030,000, divided by 800,000 papers= $2.54 per paper
Before that, total costs= 1,750,000+ 0.35*1000000= $2,100,000 divided by 1,000,000= $2.10 per paper
