Can anyone please help me with this Economics question?

Question

The question is:

Which of the following statements about fixed cost is correct?

Answer Choices are:

A. Fixed cost is always large in the long run.

B. Fixed cost is seldom larger than variable cost.

C. Fixed cost is a short-run phenomenon.

D. Fixed cost can never exceed variable cost in a profitable firm.

I am pretty sure that it's not A. Does anyone know? Thanks.

Answer 1

The answer is definitely C. Fixed costs are those which do not vary with output. In the long run all costs vary with output (by definition) therefore fixed costs are a short run phenomenon

Answer 2

the answer to your question  is the option D.Fixed cost can never exceed variable cost in a profitable firm...when a firm pays variable cost it is at shut-down point and it has to leave the market..thus it has not made any profit..but you have mentioned that the firm is profitable so...when variable cost exceeds fixed cost the firm incurs loss..

Answer 3

D. If a firm is profitable and producing on a large scale, their variable costs will exceed their fixed costs because of the output they are producing, but they achieve economies of scale due to the profits that the firm brings back in. e.g. a firm that manufactures cars incurs a higher cost of producing cars day-to-day than the cost of paying for the factory in which they are produced.

I would say D. Other people have said C. From my perspective, I don't think that it is because firms will still have to pay fixed costs even in the long run. I might be wrong though.

EDIT: Answer below is right actually. Correct answer is C. Sorry for my wrong answer.

Answer 4

C is the correct answer!

Fixed cost is not necessarily large nor small, it will vary with the firm and type of production. Fixed can excedd or be less than variable in either a profitable or not profitiable firm.

C is correct because fixed costs are not fixed for very long.

Answer 5

A is definitely not right (FC can be large or small).

B and D seem to be saying the same thing...  

B is wrong, because FC can be (and generally is) bigger than the VC (especially at low quantities).  

D is wrong because a firm can have FC of 1,000,000, VC of 100 and total revenue of 1,000,000,000.  

I believe C is right because you pay a FC in the first period to start your company, and then you never pay it again (it's VC from then on).  That makes fixed cost a short-run phenomenon.