Asked by Derek Timmer on May 04, 2024
Verified
When a firm adds physical capital,its fixed cost will decrease in the short run.
Fixed Cost
A cost that does not change with the level of output or production, such as rent or salaries.
Short Run
A period in economics during which at least one input, such as plant size, is fixed and cannot be changed.
- Understand the concept of fixed and variable costs in production.
Verified Answer
ZK
Zybrea KnightMay 08, 2024
Final Answer :
False
Explanation :
Adding physical capital will increase a firm's fixed cost in the short run because it requires an investment to purchase the new equipment or property. However, if the capital investment leads to increased production and efficiency, it may lower the firm's average total cost in the long run.
Learning Objectives
- Understand the concept of fixed and variable costs in production.
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