What is the definition of the short run?
A) a period of time when there is an expansionary gap and firms run their plants only for short periods
B) a period of up to one year long
C) a period of time when resource buyers and sellers can adjust fully to changes in the price level
D) a period of time during which resource buyers and sellers CANNOT adjust fully to changes in the price level

Question

What is the definition of the short run?  
A) a period of time when there is an expansionary gap and firms run their plants only for short periods 
B) a period of up to one year long 
C) a period of time when resource buyers and sellers can adjust fully to changes in the price level 
D) a period of time during which resource buyers and sellers CANNOT adjust fully to changes in the price level

Quizplus · Accepted Answer

In the short run, resource buyers and sellers cannot adjust fully to changes in the price level. This means that some inputs may have fixed costs or long-term contracts, making it difficult for firms to fully adjust their production levels in response to changes in prices or demand. The short run is typically defined as a period of time of less than one year. Choice A is incorrect because an expansionary gap is a situation that occurs during the business cycle, and it is not a defining characteristic of the short run. Choice B is partially correct in defining the time frame of the short run, but it does not capture the important characteristic of inflexibility of some resources. Choice C is incorrect because in the short run, resource buyers and sellers cannot adjust fully to changes in the price level.

What Is the Definition of the Short Run