Jake is a corn farmer in Nebraska. He rents his land on a long-term lease for $250,000 a year. He pays his farm hands $128,000 a year
Is his rent a fixed cost or a variable cost? Are the wages he pays his workers a fixed cost or a variable cost? Briefly explain your answers.
Jake's rent is a fixed cost. He is renting his land on a long-term lease and so the land is a fixed input. The wages Jake pays are a variable cost. Labor is a variable input so the wages are a variable cost.
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Gross domestic product calculations count only final goods and services because
A) counting all goods and services would lead to double-counting of many activities. B) these are the only goods and services that are purchased in an economy. C) one cannot calculate the quantities of intermediate goods produced. D) it is difficult to measure the prices of intermediate goods produced.
If the demand for high definition televisions increases and the supply of high definition televisions increases, then
A) it is clear that prices will increase; the change in the quantity of televisions sold is ambiguous. B) it is clear that prices will decrease; the change in the quantity of televisions sold is ambiguous. C) it is clear that quantity sold will increase; the change in the price of televisions is ambiguous. D) it is clear that quantity sold will decrease; the change in the price of televisions is ambiguous.