What is TRUE about short run and long run in production?

Question

BlackTom AI · Accepted Answer

The question asks: What is TRUE about short run and long run in production?

Option given: 'In the long run, all inputs are variable.'

Analysis of this option:
- In economic theory, the distinction between short run and long run hinges on the flexibility of inputs. The short run is defined as a period during which at least one input (commonly capital or plant size) is fixed, so the firm cannot adjust all inputs. The long run is the period long enough for all inputs to be varied, including capital, plant size, and technology. Therefore, the statement that in the long run all inputs are variable is conceptually correct.
- This aligns with the standard microeconomics framework: fixed inputs in the short run vs. variable inputs in the long run. It implies firms can adjust scale, technology, and inputs freely in the long run to reach the most cost-efficient production plan.

Since there are no other answer options provided to compare against, we focus on the coherence of the single option:
- Misconceptions to watch for: Some might think that even in the long run there are still constraints (e.g., budget, resource limits). Those limits exist in reality, but the formal model of perfect flexibility in the long run means all inputs are variable, which makes the option true within the standard framework.
- Another potential confusion: in the short run, only variable inputs are adjustable in some cases, but the definition is that at least one input is fixed; this reinforces why the long run entails full variability of inputs.

Overall, the statement correctly captures the core distinction between short run and long run in production theory: the long run features variable inputs that can be adjusted by the firm, unlike the short run where some inputs are fixed. However, since the prompt provides only this single option and no others for comparison, this analysis centers on validating the given statement within the conventional model.

ECON 2001.01 SP2025 (25209) Midterm 2

What is TRUE about short run and long run in production?

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