How does an increase in the cost of steel influence Pacific Coast Producers’ short-run costs?
An increase in the cost of steel increases __________ with no change in __________.
Wrong! - Steel is a variable factor of production. Does an increase in the cost of a variable factor of production change average fixed cost? Do the average variable cost, average total cost and marginal cost change?
That's Right! - An increase in the cost of steel, a variable factor of production, increases average variable cost. Average total cost—the sum of average variable cost and average fixed cost—increases, and marginal cost—the cost of producing an additional can—also increases. Average fixed cost doesn’t change.
New tariffs on steel are increasing costs for companies like Pacific Coast Producers, which uses steel to package canned fruits and tomatoes for major U.S. grocers, hospitals, and schools. The company is now considering passing these additional costs on to buyers.—reuters.com