A firm manufacturing custom-made furniture pays for the following: lumber, fire insurance, property tax, stains, fabrics,...

A firm manufacturing custom-made furniture pays for the following: lumber, fire insurance, property tax, stains, fabrics, building rent. Which inputs are variable? Why? Which inputs are fixed? Why?

Expert Solution

The variable factors of production refers to the factors where the payment to the factors changes with the change in the amount of the output produced. Thus, lumber, stains and fabrics are variable factors of production.

The payment to the fixed factor of production remains constant. It does not vary with the change in the level of output. Thus, fire insurance, rent and property taxes are fixed factors of production.

Rahul Sunny answered 2 years ago

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A firm manufacturing custom-made furniture pays for the following: lumber, fire insurance, property tax, stains, fabrics,...

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