Question

when q=0 , the srtc is

A) < $0

B) =$0

C) > $0

D) none of the above

Answer 1

In Short run there is at least one input which is fixed because of this in short run a firm incurs Fixed cost which is constant independent of output. So, whether one produces any output(q) or not he will still incur this fixed cost. Apart from fixed input firm also hires variable input which depends on amount of output and because of this Variable cost is 0 when q = 0.

So, When q = 0, SRTC(Short run Total cost) = Fixed Cost + Variable cost = Fixed Cost + 0 = Fixed Cost > 0

Thus, when q = 0, SRTC > 0

(Note in long run all inputs are variable that's why Long run total Cost(LRTC) = 0 when q = 0)

Hence, the correct answer is (C) > $0