A 5 percent increase in executive salaries would affect the average fixed cost of Hilton Hotels but not directly impact the other cost components. The average fixed cost represents the fixed costs per unit of output, such as salaries and rent. As executive salaries increase, the fixed costs per unit of output will rise, leading to an increase in average fixed cost.
b. Eliminating all print advertising would primarily impact the average variable cost of Hilton Hotels. Average variable cost represents the variable costs per unit of output, including expenses like advertising. By eliminating print advertising, the variable costs associated with advertising would decrease, resulting in a reduction in average variable cost.
c. Signing a new contract with the Culinary Workers Union to increase wages for kitchen workers would affect both the average variable cost and the average total cost of Hilton Hotels. Increasing wages would raise the variable costs associated with labor, thereby increasing the average variable cost. Moreover, if labor costs constitute a significant portion of total costs, the increase in variable costs would lead to an increase in average total cost.
d. The federal government levying a $5 room tax on all hotel rooms would impact the average variable cost, average fixed cost, and average total cost of Hilton Hotels. The tax would be considered a variable cost per unit of output, leading to an increase in the average variable cost. Additionally, if the tax is imposed on a per-room basis, it would not affect the fixed costs and thus not influence the average fixed cost. However, the increased variable costs would contribute to an overall increase in average total cost.