Home › CA Foundation › Business Economics › Theory of Production › A period is defined as the short run in producti…
A period is defined as the short run in production analysis when:
Aall factors of production can be freely varied
Bthe period lasts less than one calendar year
Cthe firm installs brand-new capital equipment
Dthe quantity of at least one input stays fixed
Answer & Solution
Correct answer: D. the quantity of at least one input stays fixed
1. The short-run/long-run distinction is not about clock time but about whether inputs can be varied.
2. A period is short run if at least one input (usually capital) stays fixed during it.
3. So the defining feature is that at least one input remains fixed.
4. The long run is when all factors are variable and new capital can be installed; and the distinction is unrelated to a calendar year.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit I "Theory of Production", p.15_
Related questions
The least-cost combination of factors for producing a given output occurs at the point wheA firm has Rs. 1,000 to spend; factor X costs Rs. 10 and factor Y costs Rs. 20 per unit. IIsoquants are convex to the origin because of:Using the isoquant schedule, factor combination B uses 2 units of X with 8 units of Y, andAn isoquant is best defined as a curve representing:Decreasing returns to scale set in mainly because of:In the Cobb-Douglas function Q = K L^a C^b, decreasing returns to scale result when:Constant returns to scale is also known by which of the following names?