Which of the following is CORRECT?

Question

BlackTom AI · Accepted Answer

To tackle the question, let's evaluate what each option says about costs in the short run.
Option a: 'Rent is an example of a variable cost in the short run.' In the short run, some costs are fixed (like rent) and others are variable, so labeling rent as variable is incorrect. This option misclassifies a typical fixed cost as variable, which makes it false.
Option b: 'Some costs are fixed in the long run.' This statement is misleading because, by economic definition, in the long run all inputs are variable and there are no fixed costs. Therefore, this claim is incorrect.
Option c: 'There are no fixed costs in the short run.' The short run is defined as a period during which at least some inputs (like capital or plant) are fixed. Saying there are no fixed costs in the short run contradicts this standard concept, so this option is false.
Option d: 'There are variable costs and fixed costs in the short run.' This aligns with the fundamental distinction between fixed and variable costs in the short run: some inputs are fixed, producing fixed costs, while other inputs can be varied, leading to variable costs. This option correctly captures the short-run cost structure.
Thus, after assessing each alternative, option d correctly states the cost structure in the short run, while options a, b, and c contain common misconceptions about fixed versus variable costs.

MUF0061 Economics Unit 1 - Semester 1, 2025

Which of the following is CORRECT?

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