WBCS.LIVE practice question

In microeconomic production theory, the 'Long-Run' is strictly defined as a period in which:

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Only labor is considered a variable input.
  2. Capital is fixed but labor is variable.
  3. All factors of production are variable.
  4. The firm cannot change its scale of production.

Correct answer and explanation

Correct answer: All factors of production are variable.

Explanation: āœ… Correct Answer: C) All factors of production are variable. šŸ“š Explanation: In microeconomic production theory, the 'Long-Run' is strictly defined as a planning period of sufficient duration where all factors of production are completely variable. Unlike the short-run, where certain inputs like factory size or heavy machinery are fixed, the long-run allows a firm to alter its entire production scale. Consequently, the concept of fixed costs does not exist in long-run economic analysis.