Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 7 - Businesses and the Costs of Production - Questions - Page 161: 6

Answer

Fixed cost: Purchasing the automobile Insurance Road tax Variable cost: Fuel consumption Vehicle maintenance Parking Costs to consider when traveling inter-state: By plane: Variable cost of plane tickets, traveling from home to the airport and from the airport to destination By car: Variable costs of fuel consumption, additional insurance, road taxes/tolls, parking Fixed cost of buying a car (but since the question says "your car", it can be safely assumed that this can be ignored). Implicit costs should not be ignored in this case, as the opportunity cost of choosing one option is apparent (the other option), and choosing one would mean that the other is not chosen.

Work Step by Step

The considerations are mostly variable costs, as the cost of traveling is, by virtue of having a choice between two that can be made in the short run, variable by design. The ability to change and vary costs within the short run is also part of the business model of such transport companies.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.