In the short run, does the fall in the firm´s fixed cost affect the firm´s output ?

Answer 1

No. in the short-run, profit maximizing prices are set so that MC=MR. This is possible only in the short run since unfettered entry/exit is not feasible in the short run or when the firm has pricing power (i.e. a monopoly). Since fixed costs are fixed, they do not affect marginal costs, and therefore do not affect the output decision.

Only in the long run for competitive firms (vs. monopolies) will prices converge to the minimum LRAC, which the lower fixed costs do affect.

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ASDRU: please stop answering econ questions! Your answers are ALWAYS wrong.

-----FYI: Fixed costs can decrease in the absence of destruction to the capital base. Suppose a firm leases its office building for $1 million per year. Next year, the landlord agrees to lower the rent to $975,000. This is still a fixed cost- it does not depend on Q-, but it decreased.

-----FYI: your entire analysis of the problem is wrong.

Edward: try taking an econ class before responding to econ questions.

Y_Aurora: you desperately need to repeat your intro to micro econ class.

Answer 2

A reduction in fixed cost only can be the result of a loss or destruction of fixed assets. In this case, has been reduced the capacity of company to produce goods and services, so the output will fall.
The theory in economics do not talk about fall in fixed cost, else reductions in AVERAGE fixed cost. The reduction in this is the result of an increase of quality of fixed assets and it could mean an increase in production or a reduce in the price of the good.

Answer 3

Yes because if your TFC is lowered it also means considering your TVC is the same that your are producing more but at a less cost.

Answer 4

Not necessarily.
Profits should increase.
The additional funds could be used for expansion, or additional inventory, advertising, promotion etc.