Author Question: Identify the difference between the short-run and the long-run.[br][br][b][color=#7BCCB5]Question ... (Read 81 times)

asan beg

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Identify the difference between the short-run and the long-run.

Question 2

A perfectly competitive firm produces 50 units of output, at equilibrium, in the short run. The total cost borne by the firm is 300 and the average revenue is 2 . Therefore, the firm:
 a. is just breaking even.
  b. is earning positive profits.
  c. is facing a positively sloped demand curve.
  d. is suffering losses.
  e. is experiencing diseconomies of scale.



momtoalll

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Answer to Question 1

The short run is defined as the length of time during which the decision maker can vary some inputs, although others remain fixed. In the long run all inputs are variable. Inputs are still substitutable in the short run: the firm can change its output level by changing only those inputs that are variable. Long-run substitution is more obvious: the firm can produce a given rate of output using labor intensive methods that use a high ratio of worker time to capital (machinery) services, or it can use the opposite mix, a capital intensive one.

Answer to Question 2

d



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