You are a newspaper publisher. You are in the middle of a one-year rental contra

Question

You are a newspaper publisher. You are in the middle of a one-year rental contract for your factory that requires you to pay $500,000 per month, and you have contractual labor obligations of $1,250,000 per month that you can%u2019t get out of. You also have a marginal printing cost of $0.25 per paper as well as a marginal delivery cost of $0.1 per paper. If sales fall by 20 percent from 1,000,000 papers per month to 800,000 papers per month, what happens to the Average Fixed Costs per paper?

Instructions: Round your answers to two decimal places.

Average Fixed Costs per paper (Click to select)risesfalls from $ per paper to $ per paper.

What happens to the MC per paper? (Click to select)MC changesMC does not change

What happens to the minimum amount that you must charge to break even on these costs?

Instructions: Round your answers to two decimal places.

The amount (Click to select)decreasesincreases  from $ per paper to $ per paper.

Explanation / Answer

1. from $1.85 to $2.31
2.Total cost =1,850,000+360,000=2,210,000
Average cost or break even point= 2,210,000/800,000=$2.76
AC increased from (1,850,000+450,000)/1,000,000=$ 2.3

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