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Homework answers / question archive / How does the impact of fixed costs change production decisions in the short run and in the long run? Refer to the average total cost (ATC) model included in the textbook to demonstrate
How does the impact of fixed costs change production decisions in the short run and in the long run? Refer to the average total cost (ATC) model included in the textbook to demonstrate.
We know that Total Cost = Fixed Cost FC + Variable Cost VC
• in the unlikely event that the market cost of the yield can't cover the (A)VC fragment of what's creation cost, by then (in the short run) the firm should conclude. For the present circumstance, the firm will regardless have to pay the fixed costs.
• Also, at any expense between conclusion (for instance above AVC) and acquire back the first venture at any rate the firm will get a guarantee to constantly recover FC so it will continue working (in the short run, exit as time goes on). Hence; P = AVC is the short-run conclusion limit.
