Question

Consider a local bakery that rents a facility at which it bakes loaves of bread using machinery (ovens, etc.) and labor. Which of the following best describes one of its fixed inputs in the short run?

1) Machinery
2) Labor
3) Facility
4) Bread

Answer 1

The local bakery's facility, which it rents, serves as a fixed input given that it cannot be easily altered or replaced in the short run.

Step-by-step explanation:

Inputs in production are classified as either fixed or variable. In the context of a local bakery, we're tasked to identify one of its fixed inputs during the short run. Fixed inputs are resources that cannot be readily adjusted over a short period. They define the firm's maximum output capacity, similar to how the production possibilities curve depicts a society's potential real GDP. In the tiered examples provided, such as for a pizza restaurant, the facility or the building is clearly identified as a fixed input.

Similarly, for the local bakery, the facility it rents, along with the machinery such as ovens, represents fixed inputs during the short run because they can't be easily changed or replaced in response to changes in production or demand levels.