Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 7 - Businesses and the Costs of Production - Questions - Page 160: 3a

Answer

Building a new restaurant is a long run adjustment.

Work Step by Step

Building a new infrastructure such as a restaurant, would register as fixed cost as the cost of renting/buying the land, and maintaining the infrastructure cannot be changed in the short run. Building infrastructure also required large capital, and would profoundly impact the financial decisions of the company, possibly even functioning as an investment in the far future. Thus, this would add to the long run average cost curve, where it would contribute to returns to scale.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.