A firm can change the size of its factory as well as the number of its workers. For this firm, the period is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → the long run, since all inputs can be varied
The firm can change both its factory and its workers. When all inputs can be varied, the period is the long run, however long it lasts in days or months.
Option (1) the short run, since labour can be varied — Incorrect. In the short run at least one input, here the factory, stays fixed.
Option (2) the long run, since it must be longer than one year — Incorrect. It is the long run, but not because of any length such as a year. Periods are not defined in days, months or years.
Option (3) the short run, since it may take less than a year — Incorrect. Time taken does not decide it, and all inputs can change here.
Option (4) the long run, since all inputs can be varied — Correct. All inputs can be varied.
NCERT (2026-27): “3.2 The Short Run and the Long Run … In the long run, all factors of production can be varied. A firm in order to produce different levels of output in the long run may vary both the inputs simultaneously. So, in the long run, there is no fixed factor. For any particular production process, long run generally refers to a longer time period than the short run. For different production processes, the long run periods may be different. It is not advisable to define short run and long run in terms of say, days, months or years. We define a period as long run or short run simply by looking at whether all the inputs can be varied or not.” |