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The short run, as economists use the phrase, is characterized by:
- a)at least one fixed factor of production and firms neither leaving nor entering the industry.
- b)a period where the law of diminishing returns does not hold.
- c)no variable inputs – that is all of the factors of production are fixed.
- d)all inputs being variable.
Correct answer is option 'A'. Can you explain this answer?
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The short run, as economists use the phrase, is characterized by:a)at ...
Short Run in Economics
Short run is a term frequently used by economists to describe a specific period of time in which at least one factor of production is fixed. In this period, firms are neither leaving nor entering the industry. Let's understand the characteristics of short run in detail.
Fixed Factor of Production
The short run is characterized by at least one fixed factor of production. The fixed factor of production refers to the input that cannot be changed or adjusted in the short run. For example, in the case of a bakery, the oven might be fixed in the short run, while the quantity of flour and sugar can be easily adjusted.
Firms Neither Leaving nor Entering the Industry
In the short run, firms are neither leaving nor entering the industry. This means that the number of firms in the industry remains constant. In simple terms, firms cannot enter the industry because it requires a long time to build new factories and install new machinery. Similarly, firms cannot leave the industry because they have already invested a large amount of money in the fixed factor of production.
Law of Diminishing Returns
The law of diminishing returns holds in the short run. It states that if one factor of production is fixed, then at some point, the marginal product of the variable factor of production will decline. For example, if a farmer has a fixed amount of land, he can only increase the yield by adding more labor and fertilizer. However, at some point, the marginal product of labor and fertilizer will decline.
Variable Inputs
In the short run, all inputs are not variable. Only one factor of production is fixed while the other factors of production can be varied. For example, in the case of a bakery, the oven might be fixed while the quantity of flour and sugar can be easily adjusted.
Conclusion
In conclusion, the short run is a period of time in which at least one factor of production is fixed. Firms neither leave nor enter the industry, and the law of diminishing returns holds true. Only one factor of production is fixed while the other factors can be varied.
Short run is a term frequently used by economists to describe a specific period of time in which at least one factor of production is fixed. In this period, firms are neither leaving nor entering the industry. Let's understand the characteristics of short run in detail.
Fixed Factor of Production
The short run is characterized by at least one fixed factor of production. The fixed factor of production refers to the input that cannot be changed or adjusted in the short run. For example, in the case of a bakery, the oven might be fixed in the short run, while the quantity of flour and sugar can be easily adjusted.
Firms Neither Leaving nor Entering the Industry
In the short run, firms are neither leaving nor entering the industry. This means that the number of firms in the industry remains constant. In simple terms, firms cannot enter the industry because it requires a long time to build new factories and install new machinery. Similarly, firms cannot leave the industry because they have already invested a large amount of money in the fixed factor of production.
Law of Diminishing Returns
The law of diminishing returns holds in the short run. It states that if one factor of production is fixed, then at some point, the marginal product of the variable factor of production will decline. For example, if a farmer has a fixed amount of land, he can only increase the yield by adding more labor and fertilizer. However, at some point, the marginal product of labor and fertilizer will decline.
Variable Inputs
In the short run, all inputs are not variable. Only one factor of production is fixed while the other factors of production can be varied. For example, in the case of a bakery, the oven might be fixed while the quantity of flour and sugar can be easily adjusted.
Conclusion
In conclusion, the short run is a period of time in which at least one factor of production is fixed. Firms neither leave nor enter the industry, and the law of diminishing returns holds true. Only one factor of production is fixed while the other factors can be varied.
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The short run, as economists use the phrase, is characterized by:a)at least one fixed factor of production and firms neither leaving nor entering the industry.b)a period where the law of diminishing returns does not hold.c)no variable inputs that is all of the factors of production are fixed.d)all inputs being variable.Correct answer is option 'A'. Can you explain this answer?
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