Question on: JAMB Economics - 2005
An example of a long-run cost of a firm is
A
fuel and maintenace cost
B
the planned size of plant equipment
C
the existing size of plant and equipment
D
rent on buildings
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Correct Option: D
The long run is a period of time where all factors of production are variable. In the long run, a firm can adjust its plant size, which is a major investment decision.
- A. Fuel and maintenance costs are typically considered short-run costs as they vary with the level of output in the short term.
- B. The planned size of plant and equipment represents a long-run decision because a firm can alter its scale of production in the long run.
- C. The existing size of plant and equipment represents a short-run constraint.
- D. Rent on buildings can be either a short-run or long-run cost. However, the planned size of plant and equipment represents a bigger decision to be made in the long run.
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