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Quasi-Fixed Factor of Production

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Quasi-Fixed Factor of Production 

Quasi-fixed factors are inputs that must be used in a fixed amount, independent of the output of the firm, but only if the firm’s output is positive.

Dwayne Benjamin, Toronto PPG 1002H  

 

For example, let us imagine an individual who owns a restaurant. When he decides to open his restaurant for the day, he turns his lights on. Regardless of how many customers are served during the day, the cost of the lighting will be the same. If output is very high as opposed to low, more of other inputs such as chicken and beef will be used, but the same amount of lighting will be used. Once the decision to open is made, lighting becomes very much like a fixed factor of production in this example.

If the restaurant owner decides to stay closed for the day, however, he will not turn on his lights and therefore will not incur the cost of the necessary electricity. This characteristic is what differentiates quasi-fixed factors from fixed factors. The owner's rent, for example, must be paid regardless of whether he opens on a given day or not, which makes it a true fixed factor.


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School of Public Policy and Governance