Question

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

a.) divide the variable costs of production by the quantity of output

B.) divide the total costs of production by the quantity of output

c.)divide total costs into two categories: variable costs that can't be changed in the short run and fixed costs that can be

d.)divide total costs into two categories: fixed costs that can’t be changed in the short run and variable costs that can be

Answer 1

The distinction between costs in the short run and the long run is that in the long run all the costs are variable while in the short run at least one of the costs are held constant and others are variable. This means that in the short run there are fixed costs as well as variable costs and in the long run there is only variable costs. The fixed costs are those that cannot be changed with the output produced and the variable costs changes with the output.

Ans: d.)divide total costs into two categories: fixed costs that can’t be changed in the short run and variable costs that can be