The Main Difference Between the Short Run and the Long

question 214

Multiple Choice

The main difference between the short run and the long run is that

• A)firms earn zero profits in the long run.
• B)the long run always refers to a time period of one year or longer.
• C)in the short run, some inputs are fixed and some are variable.
• D)in the long run, all inputs are fixed.

---

Definitions:

Profitability

The ability of a business to generate earnings over its costs and expenses, reflecting its financial health and efficiency.

Working Capital

The difference between a company’s current assets and current liabilities, indicating its short-term financial health and efficiency.

Current Ratio

A liquidity ratio that measures a company’s ability to pay short-term obligations with its current assets.

Quick Ratio

A financial ratio that measures a company’s ability to meet its short-term obligations with its most liquid assets.