Johnson's Candles has fixed costs of $4000 each month. Its average variable costs
are $3 per candle. The firm's current level of demand is 2500 candles per month.
The average price of its candles is $6.
a) Using an example, explain what is meant by a fixed cost of production. (2)
b) Calculate the firm's current average costs. (2)
c) Calculate the firm's current total costs of production each month. (2)
d) Calculate the profit if demand increases to 3000 candles per month. (2)
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