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IAI Actuarial Core Principles · Business Economics · Production, costs, revenue and profit in price and output decisions

In the short run, a firm such as a small Pune software testing company can vary which of the following?

In the short run at least one input, usually capital such as office space, is fixed, so the firm can vary only inputs like labour. Varying every input is possible only in the long run, which is the period used to analyse returns to scale.

  1. AOnly the quantity of labour, with some inputs such as office space fixedCorrect
  2. BAll inputs, including office space and equipment
  3. COnly the quantity of capital, with labour fixed
  4. DNo inputs, since output is fixed in the short run
  5. Only the price of its inputs

Explanation

The short run is defined as the period in which at least one factor of production is fixed. Typically capital such as premises is fixed while labour can be varied. Varying all inputs describes the long run.

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