Question

Kelly and her family sell beverages outside the stadium during local football matches. Local football matches take place every day because they are the main form of entertainment in the town. Kelly knows that demand for beverages will depend on whom the local team is playing against. Kelly has a large amount of beverages stored at home, and whatever does not get sold one day will be stored for the next day. Based on the expected demand, Kelly determines how many coolers will be needed for that day and rents the appropriate number of coolers from a local supplier (the only local supplier of coolers in town). The local supplier of coolers is an avid football fan and, therefore, opens the store only for a few hours early in the morning before the game. Once Kelly has rented the coolers, the store closes until the next day.

Which of the following statements are correct about Kelly's business? Choose one or more:
A. The long run is never less than 1 year.
B. For Kelly's business, the number of beverages is always a variable factor and the number of coolers is always a fixed factor.
C. Specifically for this problem, the long run could be described as roughly 24 hours.
D. Once Kelly has rented the coolers and the supplier has closed the store, Kelly is facing a long-run decision.
E. Before deciding how many coolers to rent, as long as the supply store is still open, Kelly is facing a long-run decision.

Answer 1

For Kelly's business, the number of beverages is always a variable factor and the number of coolers is always a fixed factor. The long run is not relevant to Kelly's business, and the decision of how many coolers to rent is a short-run decision based on the expected demand for each day.

Step-by-step explanation:

For Kelly's business, the statement that is correct is B. The number of beverages is always a variable factor and the number of coolers is always a fixed factor.

In Kelly's business, the number of beverages is a variable factor because it depends on the expected demand, which can vary from day to day depending on the local team's opponent. The number of coolers, on the other hand, is a fixed factor because once Kelly has rented them, she cannot change the number until the next day.

Regarding the other statements:

A. The long run is never less than 1 year - this statement is not relevant to Kelly's business.

C. Specifically for this problem, the long run could be described as roughly 24 hours - the long run refers to a period of time during which all factors are variable, so it is not accurate to describe it as roughly 24 hours.

D. Once Kelly has rented the coolers and the supplier has closed the store, Kelly is facing a long-run decision - this statement is not correct because once the coolers are rented, Kelly is not able to change the number until the next day, so it is a short-run decision rather than a long-run decision.

E. Before deciding how many coolers to rent, as long as the supply store is still open, Kelly is facing a long-run decision - this statement is also incorrect because the decision of how many coolers to rent is based on the expected demand for that day, which is a short-run decision since it can vary from day to day.