5. The main difference between the short run and the long run is that:
A. firms earn zero profits in the long run.
B. the long run always refers to a time period of one year or longer.
C. in the long run, only one variable can be fixed.
D. in the short run, one or more inputs is fixed.

Question

5.    The main difference between the short run and the long run is that:
A.    firms earn zero profits in the long run.
B.    the long run always refers to a time period of one year or longer.
C.    in the long run, only one variable can be fixed.
D.    in the short run, one or more inputs is fixed.

BlackTom AI · Accepted Answer

In analyzing the difference between the short run and the long run, we need to clarify what can be varied in each time frame.
Option A: 'firms earn zero profits in the long run.' This is not a universal truth. In many models, firms can earn positive profits in the long run, especially if there are barriers to entry, product differentiation, or imperfect competition. Zero profits is a specific outcome of perfect competition in long-run equilibrium, not a general property.
Option B: 'the long run always refers to a time period of one year or longer.' The designation of short run versus long run is not tied to calendar time; it is about the flexibility of inputs. Depending on the production process, the long run can be shorter or longer than one year, and there is no fixed time threshold.
Option C: 'in the long run, only one variable can be fixed.' This statement reverses the actual idea. In the long run, none of the inputs are fixed; firms can adjust all inputs. The constraint of fixed inputs applies to the short run, not the long run.
Option D: 'in the short run, one or more inputs is fixed.' This correctly captures the conventional distinction: in the short run, at least one input (such as capital) is fixed and cannot be adjusted immediately, while in the long run, all inputs are variable and firms can adjust all factors of production.
Therefore, Option D accurately describes the main difference between the short run and the long run, while the other options misstate the roles of profit, time reference, or input flexibility.

5. The main difference between the short run and the long run is that: A. firms earn zero profits in the long run. B. the long run always refers to a time period of one year or longer. C. in the long run, only one variable can be fixed. D. in the short run, one or more inputs is fixed.

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