Economics Homework Help

Question

Babsie signed a two-year lease on a building in which she plans to open a daycare center. She has no choice about how much money she spends on rent for the next two years, because she is already committed to this agreement. This is an example of 

a. Variable Costs

b. Opportunity costs

c. fixed costs

d. marginal costs

Answer 1

The answer is: c. fixed costs

In the short run, fixed costs are those that do not change on based on the firm's output. In this case, no matter how many children come to the daycare or hours the daycare is open, the rent cost will not change. This means that during the short run, fixed costs do not change.