Question

With equipment, the operating costs

A) tend to fall with the number of hours worked
B) are minimal until roughly 1000 hours of operation are reached and then they increase dramatically
C) tend to increase as the operating hours increase due to increasing maintenance & repair costs
D) ends when the maintenance and repair costs start to escalate exponentially

Answer 1

The operating costs for equipment tend to rise with increased hours of operation due to maintenance and repair costs. Continuous operation with little maintenance time can lead to diminishing marginal returns and sharp cost increases.

Step-by-step explanation:

The student's question concerns the relationship between equipment operating costs and hours of operation within a business context. The correct statement regarding operating costs is that they tend to increase as operating hours increase due to rising maintenance and repair costs. This is intuitive as producing more output, or working equipment longer, often requires more inputs and thus higher expenses. In scenarios where firms operate with low fixed costs and utilize simple tools, such as rakes and shovels, the increase in operating costs with more hours worked might not be as pronounced. However, for firms operating manufacturing plants continuously, little time for equipment maintenance can lead to diminishing marginal returns and sharply increased marginal costs for repairs and replacements.