suppose that a pharmaceutical company has the following costs. which costs do you expect to be fixed in the short run?
Which costs do you expect to be fixed in the short run for a pharmaceutical company?
Answer:
In the short run, certain costs are typically considered fixed for a pharmaceutical company. Fixed costs are those that do not vary with the level of production or output. In the case of a pharmaceutical company, the following costs are expected to be fixed in the short run:
1. Rent: The cost of renting the manufacturing facility, laboratories, offices, and other premises where operations are conducted is generally considered a fixed cost in the short run.
2. Salaries of Permanent Employees: The salaries of permanent staff, such as senior management, scientists, and other employees on fixed contracts, are likely to be fixed costs in the short run.
3. Depreciation: Depreciation of machinery, equipment, and facilities is a fixed cost that does not change in the short term.
4. Insurance Premiums: Insurance costs for the facilities, products, and liability coverage are often fixed for a certain period and are considered fixed costs in the short run.
5. Property Taxes: Property taxes on the company’s facilities are generally considered fixed costs in the short run as they are not easily adjustable in response to changes in production levels.
These are some of the costs that are expected to be fixed in the short run for a pharmaceutical company. In the long run, all costs are variable, as the company has more flexibility to adjust its operations and expenses.