Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-Economists have said that deregulation of the electric utility industry might lead to increased prices in the short run, but prices will fall in the long run. In this context:
A)the short run means the middle of next year.
B)the short run means the period after all adjustments have been made, and the quantities of all resources have been varied as necessary.
C)the long run means after all adjustments have been made, the quantities of all resources have been varied as necessary, and new market entrants begin producing electricity.
D)the short run means the period after new firms begin producing electricity.
E)the long run means approximately ten years.

Question

Quizplus · Accepted Answer

In economics, the short run refers to the period after a particular change has taken place but before all resources have had the chance to adjust. The long run refers to the period after all resources have been adjusted to their optimal usage. In the context of electricity deregulation, the long run would include the entry of new firms into the market and the adjustment of all resources to their optimal usage. Therefore, the best choice is C.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation