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Chapter 21: Problem 15

A business firm is in the short run (LO6) a) virtually all the time d) rarely b) most of the time e) never c) occasionally

Short Answer

Expert verified
A business firm is in the short run most of the time (b), as they need to make adjustments to variable inputs such as labor and raw materials while capital inputs, like land and machinery, remain fixed. This dynamic places firms in the short run for a significant portion of their operation time.

Step by step solution

01

Understanding Short Run in Economics

In economics, the short run is a period in which at least one of a firm's inputs is fixed, meaning they cannot be easily changed or adjusted. For most businesses, this fixed input is typically capital, such as land, machinery, or equipment. On the other hand, variable inputs such as labor and raw materials can be adjusted in the short run.
02

A Business Firm's Situation in the Short Run

As businesses operate, they often face situations where they need to make adjustments in response to changes in market conditions, consumer demands, or other external factors. In most cases, these adjustments need to be made quickly, meaning that capital inputs remain fixed while variable inputs (like labor) are changed. This dynamic places the business firm in the short run for most of its operation time.
03

Answering the Exercise

Based on the understanding of the short run in economics and the business firm's situation with fixed and variable inputs, we can now identify which option best describes when a business firm is in the short run: a) virtually all the time d) rarely b) most of the time e) never c) occasionally The correct answer is (b) most of the time, as businesses need to make adjustments to variable inputs within the constraints of fixed capital inputs, which places them in the short run for a significant portion of their operation time.

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Most popular questions from this chapter

Under perfect competition, (LO4) a) many firms have some influence over price b) a few firms have influence over price c) no firm has any influence over price

The perfect competitor's demand and marginal revenue curves are \((\mathrm{LO5})\) a) identical only in the long run b) identical only in the short run c) never identical d) always identical

In the long run the perfect competitor will \- (LO5) a) make a profit b) break even c) take a loss

A firm will operate at that output where \(\mathrm{MC}\) equals MR (LO3) a) only when it is maximizing its profits b) only when it is minimizing its losses c) both when it is maximizing its profits and when it is minimizing its losses d) neither when it is maximizing its profits nor minimizing its losses

At an output of \(5, \mathrm{MC}=\$ 49\) and ATC \(=\$ 52\). At an output of \(6, \mathrm{MC}=\$ 59\) and ATC \(=\$ 53\). At the breakeven point, ATC is (LO6) a) above \(\$ 53\) b) \(\$ 53\) c) between \(\$ 52\) and \(\$ 53\) d) \(\$ 52\) e) less than \(\$ 52\)
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