Suppose that the costs of operating a certain restaurant increase by the following amounts: food: 4%, labor: 5%, electricity: 3%, taxes: 2%, repairs and maintenance: 4%. By how much have the costs of operating the restaurant increased?
A) 18%
B) Less than 5%.
C) The modal average of the increases for these five items.
D) Less than 2%.
E) More than 18%.

Question

Quizplus · Accepted Answer

The correct answer is less than 5% because the question asks for the overall increase in operating costs, not the sum of the percentage increases for individual cost categories. Without knowing the proportion of each cost category to the total operating costs, we cannot simply add the percentages. The overall percentage increase is likely to be a weighted average, which would be less than the sum of the individual increases.

Suppose That the Costs of Operating a Certain Restaurant Increase