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JAMB Economics 2005 Question 24

Question 24

Theory of Costs and Revenue

An example of a long-run cost of a firm is

  1. A.fuel and maintenance cost
  2. B.the planned size of plant and equipment
  3. C.the existing size of plant and equipment
  4. D.rent on buildings
Show the answer and explanation

Answer: B (the planned size of plant and equipment)

Explanation

In the long run a firm can choose any size of plant, so long-run costs relate to the planned plant and equipment. Rent on buildings is a fixed cost of the short run.