In the long run, because firms can adjust both capital and labor:
A) firms will grow.
B) production is more expensive because firms must invest in both labor and capital.
C) the impact of diminishing marginal returns is lessened.
D) firms fire workers, replacing the labor productivity with capital.

Question

Quizplus · Accepted Answer

In the long run, firms can adjust all inputs, including both capital and labor, allowing them to optimize production processes. This flexibility reduces the impact of diminishing marginal returns, which primarily affects the short run when at least one input (typically capital) is fixed.

In the Long Run, Because Firms Can Adjust Both Capital