The fixed expense on a fixed level of capital in the short run becomes a fixed cost for the firm in the long run.

Question

Quizplus · Accepted Answer

In the long run, all costs are variable because firms have the flexibility to adjust all inputs and scale of operation, including levels of capital. Fixed expenses in the short run do not remain fixed in the long run as firms can change their capital structure and investment levels.

The Fixed Expense on a Fixed Level of Capital in the Short