When a firm adds physical capital,in the short run fixed costs will:
A)increase.
B)decrease.
C)remain the same.
D)decrease at first and then increase.

Question

Quizplus · Accepted Answer

When a firm adds physical capital in the short run, fixed costs increase because the firm has to pay for the additional resources required to operate the added capital. This is because fixed costs are expenses that do not vary with the level of output or sales, such as rent, property taxes, or salaries of administrative staff. Therefore, adding physical capital will not change the amount of fixed costs the firm has to incur.

When a Firm Adds Physical Capital,in the Short Run Fixed