Question

Jose rents office space for $20,000 per year. He uses the office to fill out tax returns for 1<000 clients per year. If the office rent increases to $25,000 per year, the marginal cost of filling out tax returns will:
A. Not change

B. Increase by $5000

C. Increase, but we cannot determine the amount of the increase with the information given.

D. Increase by $5

Answer 1

Answer:

(A) No change

Explanation:

Since the TC for filling 1000 returns increases from $2000 to $25000, this will remain fixed for any increase in the number of returns filed.

Even if the returns filed increases from 1000 to 2000 or 3000, the TC will remain the same.

Thus, there will be no change in MC.

Thus, correct option is (A) No change