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Author Question: If General Motors cuts back production on the Hummer because of high gasoline prices what should you ... (Read 114 times)

hbsimmons88

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on: Jun 29, 2018
If General Motors cuts back production on the Hummer because of high gasoline prices what should you expect to happen to the average fixed cost of production? What about the average total cost?
 
  What will be an ideal response?

Question 2

What is the drop-in-the-bucket problem?
 
  What will be an ideal response?


bpool94

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Average fixed costs should rise since the fixed costs will be spread over fewer units. With higher average fixed costs this should also push up the average total cost as well.

Answer to Question 2

The drop-in-the-bucket problem is that public goods are usually so expensive that their provision generally does not depend on whether or not any single person pays. Their contribution is considered to be a drop in the bucket.


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hbsimmons88

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Reply #2 on: Jun 29, 2018
Thank you


bpool94

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Reply #3 on: Jun 29, 2018
No problemo


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