The nature of a firm's cost (fixed or variable) depends on the
A)firm's revenues.
B)time horizon under consideration.
C)price the firm charges for output.
D)explicit but not implicit costs.

Question

Quizplus · Accepted Answer

The nature of a firm's cost depends on the time horizon under consideration. In the short run, some costs, like fixed costs such as rent, do not change regardless of the level of output, making them fixed. In the long run, however, all costs become variable and are dependent on the level of output. Therefore, the time horizon is the most important factor in determining the nature of a firm's costs. The firm's revenues, price of output, and explicit and implicit costs are important factors, but they are not as significant as the time horizon.

The Nature of a Firm's Cost (Fixed or Variable) Depends