Question

1) Economists analyze changes in a firm's output and costs by separating the time period involved into the short run and the long run. Which of the following statements describes

a difference between the short run and the long run? • A - In the short run a firm has fixed costs and variable costs. In the longrun a firm's costs are all variable costs. • B - In the short run a firm's average cost increases as it increases theamount of its fixed factors of production. In the long run a firm's averagecost increases as it increases the amount of its variable factors ofproduction while not changing its fixed factors. • C - The short run refers to production that occurs in a period less than oneyear. The long run refers to production that occurs over a period greaterthan one year. • D - In the short run a firm makes investments in capital and hires workersbut has yet to produce or sell any output. In the long run a firm uses itsproductive inputs to produce and sell its output. • E - In the short run the firm's costs are opportunity costs. In the long run afirm's costs are sunk costs.

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