When firms analyse the relationship between their level of production and their costs, they separate the time period involved into
A)morning and evening.
B)6 months or less; 6 months to 1 year; more than 1 year.
C)a fixed period and a variable period.
D)the short run and the long run.

Question

Quizplus · Accepted Answer

When analysing the relationship between production and costs, firms typically separate the time period involved into the short run and the long run. In the short run, firms have fixed inputs that cannot be easily adjusted, such as capital equipment and the size of the workforce. In the long run, firms have more flexibility to adjust all inputs, including capital and labour. The distinction between these time periods is important because it affects the cost structure of the firm and the decision-making process of the managers.

When Firms Analyse the Relationship Between Their Level of Production