Which of the following is considered a variable cost in the short run for a firm choosing a cost-minimizing combination of labor and capital?

• A. Interest payments on long-term loans
• B. Insurance premiums for equipment
• C. Wages paid to hourly workers
• D. Monthly rent for factory space

Answer: (C)

Verified step by step guidance

1. Understand the difference between fixed costs and variable costs in the short run. Fixed costs do not change with the level of output, while variable costs change as output changes.
2. Identify each option and classify it as either fixed or variable: Interest payments on long-term loans are typically fixed costs because they must be paid regardless of output.
3. Insurance premiums for equipment are also fixed costs since they are usually paid regularly and do not vary with production levels.
4. Wages paid to hourly workers are variable costs because the total wage expense changes depending on how many hours the workers are employed, which is related to the level of production.
5. Monthly rent for factory space is a fixed cost because it is a regular payment that does not fluctuate with the amount of goods produced.