Labor Is Typically Assumed to Be the Only Variable Input

question 45

Multiple Choice

Labor is typically assumed to be the only variable input in very short-run production systems, and the number of variable inputs increases as we lengthen our planning horizon from short run to long run. What happens to the labor demand curve as we move from short run to long run?

• A) Demand curve becomes less elastic.
• B) Demand curve elasticity does not change.
• C) Demand curve becomes more elastic.
• D) Demand curve becomes upward sloping.

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Definitions:

Net Operating Income

The profit generated from a company's regular business operations, excluding expenses from interest and taxes.

Variable Costing

A costing method that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Segmented Income Statements

Financial reports that show income, expenses, and profitability for different parts of an organization, such as departments or products.

Common Fixed Costs

Costs that remain unchanged in total for a given time period, despite variations in activity level.