when a firm adds physical capital, in the short run, fixed costs will: course hero

Are all costs variable in the long run?

In the long​ run, all costs are variable costs. E. In the long​ run, the​ firms' fixed costs are greater than its variable costs. In the long​ run, all costs are variable costs.

Why must a company accept market price for its physical inputs?

While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company A. must accept market price for its physical capital inputs.

What are fixed costs in accounting?

Fixed costs are business expenses that do not vary directly with the level of output i.e. they are treated as independent of the level of production.

What is the short run in economics?

In economics, it is the concept that within a certain period of time, in the future, at least one input is fixed while others are variable. The short run is not a definite period of time, but rather varies based on the length of the firm's contracts.

What does it mean when the long run average total cost curve is horizontal?

If the long-run average total cost curve for a firm is horizontal in a relevant range of production, then it indicates that there

What is marginal cost?

Marginal cost can be defined as the change in

What is pressure from competing firms?

A. pressure from competing firms will force acceptance of the prevailing market price.

Is labor a short term variable?

In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that. A. the average product of labor is always equal to the marginal product of labor.

What is the long run variable cost?

A. In the long​ run, the total variable cost equals the total fixed cost.

Is a cost variable or fixed?

In the long​ run, all costs are variable costs.

Why is it important to analyze short run versus long run costs?

In the analysis of short run versus long run costs, it is important to understand the behavior of the firms. In certain situations, it may be preferable to keep operating an unprofitable firm over the short run if this helps to partially offset costs that are fixed. In the long run, however, an unprofitable firm will be able to terminate its leases and wage agreements and shut down operations.

What is short run in economics?

In economics, it is the concept that within a certain period of time, in the future, at least one input is fixed while others are variable. The short run is not a definite period of time, but rather varies based on the length of the firm's contracts. For example, a firm may have entered into lease contracts which fix the amount of rent over the next month, year or several years. Or the firm may have wage contracts with certain workers which cannot be changed until the contract renewal.

What is variable cost?

Variable costs are costs that vary directly with output. Examples of variable costs include the costs of intermediate raw materials and other components, the wages of part-time staff or employees paid by the hour, the costs of electricity and gas and the depreciation of capital inputs due to wear and tear. Average variable cost (AVC) = total variable costs (TVC) /output (Q)

What is implicit cost?

The implicit cost for a firm can be thought of as the opportunity cost related to undertaking a certain project or decision, such as the loss of interest income on funds, or depreciation of machinery used for a capital project.

What is the second most competitive market model?

Monopolistic competition is the second most competitive market model, with many sellers, but fewer than in the pure competition model. Sellers produce varied goods, with a focus on making their products stand out for their quality in design or proficiency in manufacture. This leads to a focus on branding and limited control over prices due to a perceived difference in quality.

What is the accounting profit of investing $100,000?

For example, if you invest $100,000 to start a business and earned $120,000 in profit, your accounting profit would be $20,000 . Economic profit would add implicit costs, such as the opportunity cost of $50,000 should you have been employed instead during that period. As such, you would have an economic loss of $30,000 ($120,000 - $100,000 - $50,000).

What is normal profit?

Normal profit is the minimum level of profit needed for a company to remain competitive in the market.