Question

The short run is characterized by ___________.

• A. at least one fixed factor of production and firms neither leaving nor entering the industry
• B. a period where the law of diminishing returns does not hold
• C. no variable input, i.e., all of the factors of production are fixed
• D. all inputs being variable

Answer 1

Answer: (A)

at least one fixed factor of production and firms neither leaving nor entering the industry

The short run, as economists use the phrase, is characterized by at least one fixed factor of production so the proportion of inputs can be changed, the law of variable proportion will only operate in the short run. Firms in perfect competition can make super normal/subnormal profits in the short run as firms are allowed to enter and exit the market only in the long run.