In Economics, a Fixed Cost Is a Cost That

question 97

Multiple Choice

In economics, a fixed cost is a cost that

• A) is present only in the short run.
• B) goes up as the level of output goes up.
• C) goes down as the level of output goes up.
• D) does not vary with the level of output.

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Definitions:

Long Run

Refers to a period where all factors of production and costs can be variable, allowing firms to adjust to changes in the business environment fully.

Short Run

A period in which at least one factor of production is fixed, allowing limited adjustments to changes in production or the business environment.

Perfectly Elastic Demand

A market situation where demand for a product is infinitely sensitive to changes in price, leading to zero consumer tolerance for price increases.

Inelastic Demand

A market condition in which the demand for a product does not significantly change in response to a change in its price.