Oversize Transport Inc. supplies custom delivery service for very large construc

Question

Oversize Transport Inc. supplies custom delivery service for very large construction equipment in the southeast region of United States. The most common lead of the specialty trucker is the Caterpillar model 740 dump truck, which is about 258 feet long. The owner of Oversize Transport, who also drives the firm's single 275-foot long tractor-trailer rig, chooses to lease this huge piece of capital equipment under a five-year contract requiring monthly lease payments of $5,500 per month. Oversize Transport could not service this profitable market with any rig shorter than 275 feet. A typical delivery takes about a day and a half, so Oversize Transport can make at the most only 20 deliveries per month with its one tractor-trailer rig. Under what circumstances is the tractor-trailer a fixed input? A quasi fixed input?

Explanation / Answer

Fixed inputs are those inputs which are factors of production or resources which remains unchanged in the short-run by any firm as because the fixed inputs seeks to change the quantity of the output produced. Oversize Transport can make at the most only 20 deliveries per month with its one tractor-trailer is the fixed input proiduction.

Quasi inputs are those factors of prduction or resources which must have a fixed amonut to be used by the firm and is independent of the cause of whether the firm remains open for any day or not. That is why it is said to be the true fixed factor. lease of the catterpillar, capital equipment under a five-year contract requiring monthly lease payments of $5,500 per month is quasi-input.

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