One Assumption That Distinguishes Short-Run Cost Analysis from Long-Run Cost

question 594

Multiple Choice

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run,

• A)output is not variable.
• B)the number of workers used to produce the firm's product is fixed.
• C)the size of the factory is fixed.
• D)there are no fixed costs.

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Definitions:

Opportunity Cost

The cost of foregoing the next best alternative when making a decision or choosing to do one thing over another.

Production Possibilities Schedule

A table or graph that shows the various combinations of two goods or services that an economy can produce using all its resources efficiently.

Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen; the value of the next best choice.