Question 1

Mr. James' company produces candy bars. Which is NOT a variable input for this firm?

Accepted Answer

The big chocolate-stirring machines are considered a fixed input because they are capital equipment that does not change with the level of output in the short run.

Question 2

The time period during which all factors of production can be varied is the

Accepted Answer

The long run is the time period during which all factors of production can be varied. In the short run, at least one factor of production is fixed. Therefore, choice C, long run, is the correct answer.

Question 3

The time period during at least one input cannot be changed is the

Accepted Answer

The short run is defined as the period of time during which at least one input cannot be changed. In contrast, the long run is a period of time during which all inputs can be changed, so it is not the best choice. Production time and calendar year do not necessarily have restrictions on changing inputs, so they are not the best choices.

Question 4

During the short run, a firm cannot

Accepted Answer

In the short run, a firm is constrained by its existing plant size and cannot change it. However, it may be able to increase or decrease its use of labor and variable costs, and purchase more or less raw materials depending on the level of production.

Question 5

The short run is

Accepted Answer

The short run is the period of time in which the firm cannot change its use of at least one input. This means that in the short run, the firm is limited in its ability to adjust its production levels and is subject to fixed costs of at least one input. Choices A and B provide specific time frames but do not accurately reflect the definition of the short run. Choice C describes the period of time in which the firm can vary its rate of output, but does not necessarily define the short run.

Question 6

For a hotdog vendor, the hotdog buns represents his

Accepted Answer

The quantity of hotdog buns needed by the vendor can vary depending on the level of output, making it a variable input rather than a fixed input. Sunk cost refers to a cost that has already been incurred and cannot be recovered, which does not apply in this scenario.

Question 7

Economists generally define the short run as being

Accepted Answer

Economists generally define the short run as the period of time in which at least one of the firm's inputs, usually plant size, is fixed. This means that the firm cannot easily change its level of production capacity within the short run. The fixed input could be due to physical limitations, contractual agreements, or other reasons. This definition allows economists to analyze the behavior of firms in the short run and the implications of changes in market conditions, such as changes in prices or input costs. The other choices, B, C, and D, are incorrect because they do not capture the key characteristic of the short run in economics.

Question 8

Which of the following would be a fixed input to an automobile firm?

Accepted Answer

A factory in Detroit is a fixed input because it cannot be easily changed in the short run.

Question 9

Which of the following would be a fixed input for an amusement park?

Accepted Answer

The roller coaster would be considered a fixed input as it is a permanent and immovable part of the amusement park. Ticket takers and concession workers would be considered variable inputs as their number can be adjusted based on the level of demand. Unpopped popcorn would be considered a supply input as it can be purchased and restocked as needed.

Question 10

Which of the following is a short-run decision for a firm?

Accepted Answer

Firing workers is a short-run decision because it can quickly reduce labor costs and improve the firm's financial situation in the short term. Downsizing the manufacturing plant and investing in a new addition are long-term decisions because they involve significant capital investments and take time to implement. Expanding the distribution network can be considered a medium-term decision because it requires planning and investment, but can also provide benefits in the short run.

Question 11

The time period during which a firm's capital is fixed but its labor is variable is called

Accepted Answer

In the short run, a firm's capital is fixed but its labor is variable. This means that the firm cannot easily adjust its level of capital investment (such as buying new machinery or expanding its physical plant), but it can adjust its level of labor by hiring or laying off employees. The planning horizon refers to the time period over which a firm is making decisions, and can refer to either the short run or the long run. The long run is a time period where a firm can adjust both its capital and labor inputs, and the very long run is a theoretical time period where all inputs can be adjusted.

Question 12

The long run is defined as the time period in which

Accepted Answer

In the long run, all factors of production can be altered. This allows the firm to adjust its inputs to reach its desired level of production and maximize its profits. In contrast, in the short run, at least one factor of production is fixed, limiting the firm's ability to adjust its level of production. Choices A, B, and D do not accurately define the long run.

Question 13

A basic distinction between the long run and the short run is that

Accepted Answer

In the short run, at least one input is fixed, limiting the firm's ability to adjust production levels. In the long run, all inputs are variable, allowing for complete adjustment to changes in the market or production needs.

Question 14

A fixed resource is one that

Accepted Answer

A fixed resource is one that cannot be varied in the short run. Option A may describe a fixed asset, but not a fixed resource. Option B and D are not accurate descriptions of a fixed resource.

Question 15

The focus of firm decisions in the short run is primarily on

Accepted Answer

In the short run, firms are constrained by fixed inputs (such as plant size and capital investment) and can only adjust variable inputs (such as labor and materials) to respond to changes in demand or market conditions. Therefore, the focus of firm decisions in the short run is primarily on variable inputs.

Question 16

Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in the

Accepted Answer

The long run is a time period in which all inputs can be varied, and the firm can enter or exit the industry, as well as increase or decrease the size of its operation. Given that Ajax recently finished building a new factory, it is likely that they have made a long-term decision regarding the size and scale of their operations. Therefore, the answer is C) long run.

Question 17

In economics, how long is the long run?

Accepted Answer

In economics, the long run is defined as the period of time in which all inputs can be varied by a firm. This could be a different length of time for each firm and may vary depending on the industry or market conditions. Therefore, option D, "Whatever time it takes a firm to vary all inputs" is the most appropriate choice. The other options (A, B, and C) are arbitrary timeframes and do not accurately define the long run in economics.

Question 18

Which of the following would NOT be a short-run decision for the firm?

Accepted Answer

Building another wing on the plant to add a new assembly line would involve significant capital expenditures and would therefore be a long-run decision, not a short-run decision. The other options all involve short-run decisions that can be made relatively quickly and do not require significant capital expenditures.

Question 19

Which of the following is TRUE about the long run?

Accepted Answer

In the long run, all resources are variable as firms have the flexibility to adjust their inputs such as labor or capital to maximize profits. They can expand or contract their production capacity, unlike the short run where at least one resource is fixed, such as the size of the factory. Therefore, option A is the correct answer.

Question 20

For a hotdog vendor, the hotdog stand represents his

Accepted Answer

The hotdog stand is a fixed input because it is a long-term investment that cannot be easily changed or adjusted in the short run. It is necessary for the operation of the hotdog business, but the number of hotdogs produced or sold can be adjusted as a variable input depending on demand. Diseconomies of scale refer to increasing costs as production levels increase and do not apply to this scenario.

Quiz 22: The Firm: Cost and Output Determination