Asked by Lauren Lawlor on Jul 29, 2024
Verified
In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.
Variable Cost
Expenses that fluctuate with the level of output or business operations, contrasting with fixed costs.
Fixed Cost
Costs that do not change with the level of output produced, such as rent, salaries, and insurance premiums.
- Understand the importance of marginal cost and marginal revenue in a corporation's strategy to optimize profits.
- Elucidate the significance of opportunity costs, sunk costs, and fixed costs within the context of corporate decision-making and profit generation.
Verified Answer
ZK
Zybrea KnightAug 01, 2024
Final Answer :
False
Explanation :
In the short run, a firm makes profit-maximizing production decisions based on variable costs, as fixed costs cannot be changed and are therefore not relevant to the decision of how much to produce.
Learning Objectives
- Understand the importance of marginal cost and marginal revenue in a corporation's strategy to optimize profits.
- Elucidate the significance of opportunity costs, sunk costs, and fixed costs within the context of corporate decision-making and profit generation.