When fixed costs are high relative to variable costs, producers will tend to

Question

Quizplus · Accepted Answer

When fixed costs are high relative to variable costs, producers are more likely to continue producing in the short run even if they incur some losses because they need to cover their fixed costs, which do not change with the level of output. Stopping production would not save these costs, so they might as well continue producing if they can cover their variable costs and contribute something towards their fixed costs.

When Fixed Costs Are High Relative to Variable Costs, Producers