Fixed costs are costs that do not vary with the level of output, such as rent or equipment. These costs exist in the short run, as they are necessary for production, but cannot be easily adjusted in the short run. In the long run, all costs are variable, as the firm has the ability to adjust its inputs and therefore has more flexibility in adjusting fixed costs.

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Fixed Costs Exist in

Question 10

Multiple Choice

Fixed costs exist in

A) both the long run and the short run.
B) only in the long run but not in the short run.
C) only in the short run but not in the long run.
D) in neither the long run nor the short run.
E) sometimes in the short run and sometimes in the long run.

Correct Answer: