Business Costs

Business Costs & Scenarios to Consider

By Deneva Contreras

Different Costs to Consider

Fixed Costs: one-time costs, costs that don't change

• ​exs rent and lease costs, salaries, utility bills, insurance, and loan repayments

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Variable Costs​: costs that changes in proportion to how much a company produces or sells

• ​exs raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies

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​Different Business Situations

Surplus: the amount of an asset or resource that exceeds the portion that's actively utilized; excess supply

• ​ex products that remain sitting on store shelves, unpurchased.

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Shortage: ​ a condition where the quantity demanded is greater than the quantity supplied at the market price; excess demand

• ​could lead to people going elsewhere

Multiple Choice

How can prices solve problems of surplus?

• Higher prices decrease quantity demanded and increase quantity supplied.

• Lower prices decrease quantity demanded and decrease quantity supplied

• Lower prices increase quantity demanded and decrease quantity supplied.

• Higher prices increase quantity demanded and increase quantity supplied.

Multiple Choice

Let's pretend you own a bakery that sells muffins. A shift in the demand curve has led to a shortage of eggs so the price for them has increased. What is something you can do to offset these costs?

• By growing more rice

• By switching to a barter system

• By increasing the price of muffins

• By allocating rice through rationing

Multiple Choice

Under what conditions might a bakery have to throw out many muffins at the end of the day?

• a surplus, when quantity demanded is lower than quantity supplied

• a shortage, when quantity demanded is lower than quantity supplied

• a surplus, when quantity supplied is lower than quantity demanded

• a shortage, when quantity supplied is lower than quantity demanded

Multiple Choice

If a business owner becomes aware of a shortage in the market for the good or service they produce, they are likely to

• increase supply and lower the price.

• reduce supply and lower the price.

• reduce supply and raise the price.

• increase supply more and raise the price.

Multiple Choice

Let's say at your bakery you've hired too many pastry chefs so you're experiencing diminishing returns. What is something you can do to address this issue?

• Hire more workers.

• Wait for its workers to improve.

• Fire the manager.

• Invest in more equipment.