When the capital (a fixed input)changes

Question

Quizplus · Accepted Answer

When the capital, which is a fixed input, changes, it affects the production function and the short-run average total cost curve. As a result, the short-run average total cost curve shifts upwards or downwards depending on the nature of the change in capital. Generally, an increase in capital leads to a downward shift of the curve, while a decrease in capital leads to an upward shift of the curve. Therefore, the correct answer is D, the short-run average total cost curve shifts.

When the Capital (A Fixed Input)changes