Coffee king Starbucks raises its prices Starbucks will raise its price because t
ID: 1111404 • Letter: C
Question
Coffee king Starbucks raises its prices
Starbucks will raise its price because the wholesale price of milk has risen by nearly 70% in the past year. There's a lot of milk in those Starbucks lattes, noted JohnGlass, CIBC World Markets restaurant analyst.
Source: USA Today, July 24, 2007
Is the cost of milk a fixed cost or a variable cost?
Describe how the increase in the price of milk changes Starbucks' short-run cost curves.
The cost of milk is a ______ cost. An increase in the cost of milk shifts the ______ curves upward.
A. variable;total cost, total variable cost, and total fixed cost
B. fixed;total cost and average total cost
C. fixed;average total cost, average fixed cost, total cost, and total fixed cost
D. variable;average total cost, average variable cost, total cost, total variable cost, and marginal cost
Explanation / Answer
THe cost of Milk is a VARIABLE cost. An increase in the cost of milk shifts the TOTAL COST AND AVERAGE TOTAL COST curves upward.
because, we know that, milk is a input used in the production of coffee by a Starbucks. therefore milk is a varaible cost for starbuck. and increase in cost of milk shfts the total cost and average total cost curves upward.