When a firm adds physical capital,its variable cost will decrease in the long run.

Physical Capital

Tangible assets such as buildings, machinery, and equipment used in the production of goods and services.

Variable Cost

Costs that vary directly with the level of production, such as raw materials, labor, and energy used in the manufacturing process.

Long Run

A period in economics during which all factors of production and costs are variable, allowing for the full adjustment to changes.

Comprehend the impact of adding physical capital on a firm's costs and productivity.
Master the understanding of variable and fixed costs associated with manufacturing processes.

Verified Answer

Final Answer :

True

Explanation :

When a firm adds physical capital, its production efficiency increases which leads to a decrease in variable cost in the long run.

Learning Objectives

Comprehend the impact of adding physical capital on a firm's costs and productivity.
Master the understanding of variable and fixed costs associated with manufacturing processes.