Question

Two stores - Lazy Guys and Ralph's Recliners - are located in the same city. Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same. Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production. Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?

A. The price of recliners charged by​ Ralph's is greater than the price charged by Lazy Guys.
B. Because​ Ralph's Recliners sells more output its average fixed costs are lower than Lazy​ Guy's average fixed costs.
C. ​Ralph's explicit costs are less because Ralph owns the land on which his building is located. Lazy Guy must make lease payments for the land on which its store is located.
D. The rent Lazy Guys pays for its building is greater than the rent paid by​ Ralph's Recliners.

Answer 1

B)

Step-by-step explanation:

Because Ralph´s Recliners assigns the fixed costs to more quantity of recliners. Each one of the products charges less part of the fixed cost, compared with each one made by Lazy Guys. Then, the average total cost is lower.