Which of the following statements about the short run and long run is true? The

Question

Which of the following statements about the short run and long run is true? The short-run average cost curves lies below the long-run average cost curves. A firm can vary all of its factors of production in both the short run and the long run. Free entry and exit of firms is possible in the short run. but entry and exit of firms is restricted in the long run. The number of firms in the industry is fixed in the short run, but in the long run the number can change. If new firms are expected to enter an existing market, the profits of all firms are likely to increase the market demand is likely to increase the market supply is likely to fall the market price is likely to fall The reservation value of a buyer reflects her. total income total utility from a good or service willingness to pay for a good or service trade-off between buying various goods and services The reservation value of a seller reflects her. marginal cost total cost marginal revenue willingness to pay for using a resource

Explanation / Answer

Q.9

Correct Answer:

The number of firms in the industry is fixed in short run, but in the long run numbers can change.

Explanation:

In the short run, firms cannot change their all input factors of production. Thus, they are not able to adjust their production to maximize their profit. But in the long run, they can change all their input factors to adjust according to the market conditions. If firms don’t make a profit in the long run, then they exit from the industry. In a reverse scenario, if firms make profit in the long run, then other competitor firms join them the industry. Thus, it is said that numbers are fixed in the short run, but, in the long run it changes.

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