24. The basic characteristic of the short run is that

A. barriers to entry prevent new firms from entering the industry.
B. the firm does not have sufficient time to change the size of its plant.
C. the firm does not have sufficient time to cut its rate of output to zero.
D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

Question

24.    The basic characteristic of the short run is that

A. barriers to entry prevent new firms from entering the industry.
B.  the firm does not have sufficient time to change the size of its plant.
C. the firm does not have sufficient time to cut its rate of output to zero.
D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

BlackTom AI · Accepted Answer

Question restatement and options:
- The basic characteristic of the short run is that
  A. barriers to entry prevent new firms from entering the industry.
  B. the firm does not have sufficient time to change the size of its plant.
  C. the firm does not have sufficient time to cut its rate of output to zero.
  D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

Option A analysis:
- This statement claims barriers to entry keep new firms out in the short run. In microeconomics, barriers to entry are typically treated as a long-run or market-structure feature rather than a short-run temporal constraint. While some markets have high entry barriers, that is not what defines the short run; the short run is about certain inputs being fixed, not about market-wide entry barriers. Therefore, this option misidentifies the defining short-run condition and is incorrect.

Option B analysis:
- This option states that in the short run the firm cannot change the size of its plant (i.e., its fixed scale of operations). This aligns with the standard economic definition: in the short run at least one input (usually the plant size) is fixed, so firms cannot adjust all factors of production immediately. This captures the essential characteristic of the short run and is the correct interpretation among the choices.

Option C analysis:
- The claim that the firm cannot reduce output to zero in the short run is misleading. A firm can indeed temporarily shut down or reduce output to zero if it is not profitable to operate, which is a possible short-run adjustment. The key short-run constraint is not the impossibility of reducing output to zero, but the fixed nature of at least one input (the plant size). By focusing on a shutdown option rather than the fixed-input constraint, this statement misstates the core attribute of the short run. Hence, it is incorrect.

Option D analysis:
- This option asserts that the firm cannot change any of its inputs in the short run. In reality, the short run is characterized by some inputs being fixed (like capital) while others can be varied (like labor or raw materials). Therefore, this statement overstates the rigidity of production in the short run and is incorrect because it ignores the typical ability to adjust some inputs even when others are fixed.

Summary of reasoning:
- Option A misattributes the short-run concept to barriers to entry, which are not the defining feature of the short run.
- Option B correctly identifies that the plant size is fixed in the short run, capturing the essential constraint faced by firms in the short run.
- Option C incorrectly emphasizes a shutdown possibility as the defining trait, which is not what sets the short run apart from the long run.
- Option D incorrectly states that no inputs can be changed, whereas in the short run, some inputs are adjustable while others are fixed.

ECNM1116.32925.202530 Spring 2025 Test 3

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