The main difference between the short run and the long run is that: (i) firms earn zero profit in the long run

Economics Dec 09, 2020

The main difference between the short run and the long run is that:

(i) firms earn zero profit in the long run.

(ii) The long-run always refers to a time period of one year or longer.

(iii) In the short run, some inputs are fixed and some are variable.

(iv) In the long run, all inputs are fixed.

Expert Solution

The correct answer is (iii) In the short run, some inputs are fixed and some are variable. In the long run, all inputs are variable. However, in the short run, the firm's production levels are the only input that can be adjusted. The other items are not.

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