In the short run,a firm cannot change the amount of capital it uses.Therefore the cost of capital is a
A) short-run cost.
B) variable cost.
C) productivity cost.
D) fixed cost.
E) marginal cost.

Question

Quizplus · Accepted Answer

The fact that the firm cannot change the amount of capital it uses in the short run indicates that the cost of capital is a fixed cost. Fixed costs are expenses that do not vary with changes in the level of production or sales, such as rent or equipment costs. In this case, the cost of capital is a fixed cost because it is determined by the amount of capital the firm has invested, which cannot be changed in the short run.

In the Short Run,a Firm Cannot Change the Amount of Capital