Short-run cost relationships for a firm are
A) determined by the law of diminishing marginal product.
B) determined by the specific long-run relationships that exist.
C) due to the level of wages relative to other input prices.
D) due to the normal contractual relations in a market.

Question

Quizplus · Accepted Answer

Short-run cost relationships for a firm are determined by the law of diminishing marginal product, which states that as more of a variable input is added to a fixed input, the marginal product of the variable input will eventually decrease. This leads to an increase in marginal cost and ultimately total cost for the firm. Therefore, choice A is the correct answer.

Short-Run Cost Relationships for a Firm Are