1. Changes in the price of key commodities have a significant impact on a company's bottom...

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1. Changes in the price of key commodities have a significant impact on a company's bottom line. For virtually all companics, the price of energy is a substantial portion of their costs. In addition, many industrics-such as those that produce beef, chick- en, high-fructosc corn syrup and ethanol-are highly dependent on the price of com. In particular, corn has scen a significant increase in price. a. Explain how the cost of energy can be both a fixed cost and a variable cost for a company. b. Suppose energy is a fixed cost and energy prices rise. What happens to the compa- ny's average total cost curve? What happens to its marginal cost curve? Illustrate your answer with a diagram. c. Explain why the cost of com is a variable cost but not a fixed cost for an ethanol producer. d. When the cost of com goes up, what happens to the average total cost curve of an ethanol producer? What happens to its marginal cost curve? Illustrate your answer with a diagram. 1. Changes in the price of key commodities have a significant impact on a company's bottom line. For virtually all companics, the price of energy is a substantial portion of their costs. In addition, many industrics-such as those that produce beef, chick- en, high-fructosc corn syrup and ethanol-are highly dependent on the price of com. In particular, corn has scen a significant increase in price. a. Explain how the cost of energy can be both a fixed cost and a variable cost for a company. b. Suppose energy is a fixed cost and energy prices rise. What happens to the compa- ny's average total cost curve? What happens to its marginal cost curve? Illustrate your answer with a diagram. c. Explain why the cost of com is a variable cost but not a fixed cost for an ethanol producer. d. When the cost of com goes up, what happens to the average total cost curve of an ethanol producer? What happens to its marginal cost curve? Illustrate your answer with a diagram.

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a Energy can be both a fixed cost and variable cost because it is an input to maintain ... View the full answer