Which one of the following statements is MOST accurate?
A) Factors of production can only be over-employed in the short run.
B) Factors of production can only be under-employed in the short run.
C) Factors of production can be over- or under-employed in the long run.
D) Factors of production can be over- or under-employed in the short run.
E) Factors of production are fully employed in the short run.

Question

Quizplus · Accepted Answer

Factors of production can be over- or under-employed in the short run. In the short run, some factors of production may be fixed and cannot be adjusted immediately to changes in demand. As a result, firms may over- or under-employ other factors of production, such as labor or capital, to match the fixed factors. In the long run, all factors of production can be adjusted so that they are employed at their optimal levels.

Which One of the Following Statements Is MOST Accurate