ECONOMICS
PROFIT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -Fixed costs are expenditures that do not change regardless of the level of production, at least not in the short term. Whether you produce a lot or a little, the fixed costs are the same. One example is the rent on a factory or a retail space.
Detailed explanation-2: -In the short run, there are both fixed and variable costs. In the long run, there are no fixed costs. Efficient long run costs are sustained when the combination of outputs that a firm produces results in the desired quantity of the goods at the lowest possible cost. Variable costs change with the output.
Detailed explanation-3: -Answer: The fixed cost(FC) is the one that remains constant in the short run and does not depend on the quantity of output produced. Therefore, in the short run, FC is not relevant in the decision-making process as the firms cannot change this cost in the short run.
Detailed explanation-4: -The answer is that shutting down can reduce variable costs to zero, but in the short run, the firm has already committed to pay its fixed costs. As a result, if the firm produces a quantity of zero, it would still make losses because it would still need to pay for its fixed costs.