A firm ________ in the short-run has an incentive to expand its long-run scale of operation.
A) breaking even
B) earning positive profits
C) that shuts down
D) making a loss

Question

Quizplus · Accepted Answer

A firm earning positive profits in the short-run indicates that it is successfully covering all its variable and fixed costs, plus earning extra. This success suggests that expanding operations could lead to even greater profits in the long run, providing an incentive to increase the scale of operation.

A Firm ________ in the Short-Run Has an Incentive to Expand