Question

Show working

5) Which of the following would NOT be a short-run decision for the firm?

A) Recall workers who were previously laid-off

B) Have labor work two hours overtime each day in order to expand output

C) Build another wing on the plant in order to add a new assembly line

D) Place an order with a supplier for additional raw materials

6) A basic distinction between the long run and the short run is that

A) if a firm produces no output in the long run, it still incurs a cost.

B) the opportunity costs of production are lower in the short run than in the long run.

C) in the long run, some inputs are fixed, while in the short run, all inputs are variable.

D) in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.

7) During the short run, a firm cannot

A) increase its use of labor.

B) change its plant size.

C) purchase more raw materials.

D) change its variable costs.

8) For a hotdog vender, the hotdog stand represents his

A) fixed input.

B) variable input.

C) diseconomies of scale.

D) none of the above.

9) A fixed resource is one that

A) is physically tied to a specific location.

B) costs more than the average daily revenue of the firm.

C) cannot be varied in the short run.

D) can be disposed of only if the firm goes out of business.

10) Mr. James' company produces candy bars. Which is NOT a variable input for this firm?

A) Sugar

B) Assembly line workers

C) The big chocolate-stirring machines

D) Packaging materials

Answer 1

1. Short run is a period where firm can experiment only with the variable inputs like raw materials,labor etc.As in short run fixed factors remain fixed so  building another wing on the plant in order to add a new assembly line would not be a short run decision for the firm.
2. Short run is a period where all factors of production are not variable some are fixed but in Long run all factors become variable and because of that in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted.Thus answer is option D.
3. During the short run a firm cannot change its plant size because plant is a fixed factor under short run.Thus the answer is B.
4. For a hotdog vender, the hotdog stand represents his fixed input. because he cannot change it in the short run.
5. Fixed resource or fixed factor is one which cannot be varied in the short run.e.g machines,buildings etc.
6. The big chocolate stirring machines are not variable input.It is a fixed input.