Question

Use the following information to answer this question. Kim decides to quit her old job that paid $1,000 a month to open a flower shop in downtown Lexington. Suppose she opens her shop in a building she owns, which she could be renting out to someone else for $1,000 a month. In addition, A to Z Rental required her to sign a one year lease on the coolers needed for her shop and the rent is $200 a month. Hiring three assistants costs her $1,800 a month. Finally, the flowers, vases and other material needed for making flower arrangements average $5,000 a month.

Kim’s long run fixed costs are:

$ __________ per month

Answer 1

Kim's long run fixed costs for her flower shop are $3,000 per month.

Step-by-step explanation:

The fixed costs for Kim's flower shop would include the potential rental income she could have earned by renting out the building, the lease on the coolers, and the cost of hiring assistants. These fixed costs do not vary with the level of production or sales and would be incurred regardless of whether or not the flower shop is open. In this case, the fixed costs would be:

• Rental income: $1,000
• Lease on coolers: $200
• Hiring three assistants: $1,800

Adding these costs together, Kim's long run fixed costs would be $3,000 per month.

Learn more about Fixed costs here:

Answer 2

$0

Step-by-step explanation:

According to the scenario, computation of the given data are as follows,

Fixed costs are linked with fixed inputs, which do not fluctuate and remain constant in the short term.

The long run is a time during which all of the inputs are transformed into variables cost.

Hence, in long run, Kim's fixed cost will be $0.