Question

At any one time: Select one: a. the firm will make only long-run decisions. b. a...

At any one time:

Select one:

a. the firm will make only long-run decisions.

b. a firm will be making both short-run and long-run decisions.

c. a firm must make only short-run or long-run decisions.

d. the firm will find it most efficient to make only short-run decisions.

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Homework Answers

Answer #1

The short run decisions are more efficient than the long run decision because in the long run price of labor and capital may change. Thus firms will have to predict about those changes which is quite risky. However in the short run, only one input is variable and generally plant size remains constant. Hence by changing amount of labor only, firms can make short run decisions more efficiently. Hence the answer will be :

d. the firm will find it most efficient to make only short-run decisions.

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