Question

Which of the following statements regarding short run and long run cost functions is not true?

• A. A variable input varies according to the quantity of output to be produced.
• B. In the long run, one or more of the inputs of the production process is fixed.
• C. In the long run, all the inputs are fixed.
• D. In the long run, there are no restrictions on the resource allocation in the production process.

Answer 1

Answer: (D)

In the long run, there are no restrictions on the resource allocation in the production process.

In the long run period, all the factors of production becomes variable, i.e, the difference between fixed cost and variable cost disappears. Thus, there are no restrictions on resource allocation in the long run.