Suppose Larry's Lariats Produces Lassos in a Factory, Using Nine

question 75

Multiple Choice

Suppose Larry's Lariats produces lassos in a factory, using nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length and seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. If the company decreases its production of lassos, what is true regarding the company's costs?

• A)The variable cost of the rope would drop to zero.
• B)The fixed cost of the rope cutting machine would stay the same.
• C)The fixed cost of employee wages would stay the same.
• D)None of these are correct.

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