Jane Westerlund Owns a Picture-Framing Shop, the Caplow Co

question 335

Multiple Choice

Jane Westerlund owns a picture-framing shop, The Caplow Co.The average price she receives for a picture she frames for a customer is $120.This price must cover her average costs for a typical framed picture of $5 for glass, $2 for matting, and $13 for the frame, and $30 for the labor involved.She must also cover monthly expenses of $1,000 for rent and insurance, $200 for heat and electricity, $500 for advertising, and $3,500 for her salary.Westerlund is considering buying an automatic mat-cutting machine in order to reduce the number of hours of direct labor required to produce a framed picture.In considering this purchase, she should recognize this purchase will __________ Caplow's variable cost and __________ Caplow's fixed cost.

• A)decrease; increase
• B)decrease; decrease
• C)increase; decrease
• D)increase; increase
• E)have no effect on; have no effect on

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Definitions:

Evolutionary Theory

The theory that explains the diversity of life on Earth through the processes of natural selection and genetic mutation over time.

Social Exchange Theory

The view of social relationships as involving an exchange of goods, the objective of which is to minimize costs and maximize benefits.

Mere Exposure Effect

A mental effect in which individuals grow fond of things simply due to their familiarity.

Social Identity Theory

A psychological theory that examines the influence of group membership on people's self-concept and behavior with others.