When demand for a firm's product decreases, the firm can take a number of steps to adjust costs and quantities supplied to the market. Some are listed below. Which actions are short run and which are long run? Explain your reasoning
a. Layoff 25 percent of the firm's existing employees.
b. Declare bankruptcy and sell all of the firm's plant and equipment.
c. Require management personnel to take a significant cut in pay.
d. Furlough employees for 3 days each month.
e. Move to a smaller production facility.
Options a, c, and d are all short-run options because they all involve changes in variable inputs only (quantity of labor and labor costs). Options b and e are long-run options because they involve changes in fixed factors, i.e., plant and equipment.
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