A firm's decision to expand the size of its production facility would be considered a short-run decision so long as the expansion can be completed in less than a year.

Question

Quizplus · Accepted Answer

The distinction between short-run and long-run in economics is not based on specific time frames such as a year, but rather on the flexibility of input adjustments. Short-run decisions involve at least one fixed input, while long-run decisions allow all inputs to be variable. Expanding a production facility involves changing the scale of operations and altering fixed inputs, thus it is considered a long-run decision regardless of the time it takes to complete.

A Firm's Decision to Expand the Size of Its Production