What is the difference between the short run and the long run?
What will be an ideal response?
The short run is a time period so short that the firm cannot change the quantity of at least one factor of production, say plant size for a manufacturer or land for a farmer. The only way to increase output, therefore, is by combining more units of the variable factors of production with the fixed factor of production. The long run is a time period sufficiently long that a firm can change the quantity of all factors of production. In the long run, nothing is fixed so output can be produced with whatever combination of factors of production the firm chooses.
You might also like to view...
On a linear demand curve that intersects both axes
A) the elasticity exceeds 1.00 at all prices. B) the elasticity is less than 1.00 at all prices. C) the elasticity equals 1.00 at all prices. D) the elasticity decreases as the price falls and quantity increases.
Refer to Figure 23-2. If the U.S. economy is currently at point N, which of the following could cause it to move to point K?
A) Government expenditures increase. B) Firm's cash flows rise as profits rise. C) Households expect future income to rise. D) Household wealth falls.