When Fixed Costs Are High Relative to Variable Costs, Producers

question 214

Multiple Choice

When fixed costs are high relative to variable costs, producers will tend to

• A) continue producing in the short run even if they incur some losses.
• B) quickly shut down in the short run whenever they see losses.
• C) only produce in the short run as long as the product price is lower than their average variable costs.
• D) produce in the short run even if the product price is lower than their average fixed costs.

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Definitions:

Premium

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Raising capital through borrowing money that must be repaid over time, typically with interest.

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