Question

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers A. labor to be variable and capital to be fixed. B. both labor and capital to be fixed. C. both labor and capital to be variable. D. capital to be variable and labor to be fixed.

Answer 1

Answer:

A. labor to be variable and capital to be fixed.

Explanation: Fixed Capital is a capital that does not change with time, this type of Capital include buildings and other forms of assets that done get consumed as the production processes can continues.

Variable Capital is a Capital that is expected to change as time goes, they don't remain the same. This type of Capital includes the amount spent in paying wages such as hourly wages etc.

IN THE SHORT RUN THE COMPANY WILL CONSIDER LABOR TO BE A VARIABLE WHILE THE BUILDING WILL BE CONSIDERED FIXED.