Question

identify one industry with high fixed costs in the short run. Then, identify an industry with high marginal costs in the short run. Be sure to analyze specific examples of costs to justify your choices.

Answer 1

In risk consulting industry there are companies who do not manufacture any product but offer various professional services like consulting, risk analytics, it risk management, etc. The main expense of such companies are the rent of office space, electricity, fixed labor cost, research and development cost, etc. These expense are mainly fixed and do not change with respect to the volume of sales.

In consumer goods industry there are companies who manufacture various household product for selling it in the market. The main expense of such companies are the expense incurred in manufacturing products , e.g. materials costs, direct labor costs, selling costs, etc. . These expense vary with the change in volume of production. Thus the major expense of this industry comprises of marginal costs which increases with the increase in production and vice-versa.