An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Question

Quizplus · Accepted Answer

In the short run, the level of fixed cost is already determined and cannot be adjusted. Therefore, an increase in fixed cost will not affect the firm's profit-maximizing output, which is determined by the intersection of marginal cost and marginal revenue. However, in the long run, firms can adjust their fixed costs by changing their production capacity, which will affect their profit-maximizing output.

An Increase in a Firm's Fixed Cost Will Not Change