Suppose you are to specify a short-run total variable cost function for a nursing home. Explain the variables you would include in the function. What is the expected relation between a change in each of these variables and short-run total variable costs?

Yes

To specify a short-run total variable cost function for a nursing home, you would need to include various variables that affect the costs in the short run. The total variable costs refer to the expenses that change with the level of output or activity in the short run. Here are some variables you would likely include in the function:

1. Labor costs: This variable represents the wages and salaries paid to the nursing home staff. As the number of employees or hours worked increases, the labor costs will also rise, resulting in a higher total variable cost.

2. Supplies and materials: This variable accounts for the cost of medical supplies, equipment, medications, and other essential items needed to provide care in a nursing home. As the quantity or price of supplies and materials increases, it will raise the total variable cost.

3. Utilities expenses: This variable encompasses the costs of electricity, water, heating, cooling, and other utility services required to operate the nursing home facilities. Changes in utility rates or usage will cause fluctuations in the total variable cost.

4. Maintenance and repairs: This variable includes the costs associated with repairing and maintaining the nursing home's infrastructure, including building repairs, renovations, and equipment maintenance. Higher repairs and maintenance needs will increase the total variable cost.

5. Administrative costs: This variable represents the expenses related to administrative functions, such as managing billing, accounting, and human resources. Changes in administrative costs, such as hiring additional administrative staff, will impact the total variable cost.

The expected relation between a change in each of these variables and short-run total variable costs depends on how these costs vary with changes in the level of activity or output. In general, an increase in any of these variables would result in a higher total variable cost. For example, hiring more staff (increasing labor costs), purchasing more supplies, or experiencing higher utility or maintenance expenses will all lead to an increase in the total variable cost for the nursing home in the short run. Conversely, reducing these variables would lead to a decrease in the total variable cost.