Asked by Jalen Baker on May 16, 2024
Verified
In the short run, fixed costs are important in determining a competitive firm's optimal level of output.
Fixed Costs
Costs that do not vary with the level of output produced, such as rent, salaries, and insurance premiums.
Optimal Level
The best or most efficient point at which a particular action or operation achieves a balance between benefits and costs.
- Grasp the significance of fixed and variable costs in determining a firm's production decisions.
Verified Answer
CA
Claire AlvarezMay 17, 2024
Final Answer :
False
Explanation :
In the short run, a competitive firm's optimal level of output is primarily determined by its variable costs and the market price of its product, as fixed costs do not change with the level of output and thus do not affect the marginal decision-making process.
Learning Objectives
- Grasp the significance of fixed and variable costs in determining a firm's production decisions.