Suppose $Q = \sqrt { \bar { K } } L$ in the short-run. The firm's short-run fixed cost curve is:
A) $S F C = \frac { Q ^ { 2 } } { K }$
B) $S F C = \frac { w Q ^ { 2 } } { \bar { K } } + r \bar { K }$
C) $S F C = w Q ^ { 2 } / \frac { - } { K }$
D) $S F C = r K$

Question

Quizplus · Accepted Answer

Fixed costs are those that do not change with the level of output. Since $Q = \sqrt { \bar { K } } L$ involves $\bar{K}$ (a constant representing fixed capital) and $L$ (variable labor), the short-run fixed cost (SFC) is related only to capital ($K$) and its cost, which is represented by $rK$, where $r$ is the cost of capital. The other options incorrectly relate fixed costs to output levels or misapply the formula.

Suppose Q=KˉLQ = \sqrt { \bar { K } } LQ=Kˉ​L

Suppose $Q = \sqrt { \bar { K } } L$