• A. All inputs are fixed
  • B. At least one of the firm’s input is fixed ✓
  • C. At least two inputs are fixed
  • D. All inputs are variable


The answer to the question is: B. At least one of the firm’s input is fixed

In economics, the short run refers to a period of time in which at least one of the inputs used in production is fixed, while others remain variable. The distinction between the short run and the long run is based on the flexibility of inputs that firms can adjust to changes in production levels.

During the short run, firms are constrained by certain factors that cannot be easily altered or adjusted. These fixed factors are typically referred to as “fixed inputs” and can include physical capital, such as buildings and machinery, or even contractual agreements with suppliers. On the other hand, variable inputs are those that can be adjusted in response to changes in output levels, such as labor or raw materials.

The presence of fixed inputs in the short run has important implications for a firm’s production decisions and cost structure. Since at least one input is fixed, firms cannot easily increase or decrease their production capacity in response to changes in demand. This means that they must operate within the constraints imposed by their fixed inputs.

For example, suppose a bakery wants to increase its production of bread. In the short run, it may have a fixed number of ovens, which limits its ability to produce more bread. The bakery can hire more workers (a variable input) to increase output up to a certain point, but it cannot expand its oven capacity until the long run when it can invest in additional ovens or expand its facilities.

In summary, the short run is characterized by having at least one fixed input, while the long run allows for all inputs to be variable. This distinction is crucial for understanding a firm’s ability to adjust its production levels and costs over different time horizons.

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