Question

Determine whether each of the given statements describes short-run period, long-run period, or neither. Short run _______

Long run _______
Neither _______
Answer Bank - Because of dismal sales last year, half of the city's donut shops exit the industry - In order to produce more cookies, Mrs. Meadows asks her third shift to work overtime - Purpleberry Frozen Custard has $11,000 of fixed costs and $45,000 of variable costs. - Newton Bros. Bagels opens a new store on the other side of town. - This lasts at least six months but no longer than one year - This is a period of time during which a firm is unable to increase or decrease its amount of capital

Answer 1

Short run: Dismal sales causing donut shops to exit. Long run: Mrs. Meadows asks for overtime and Newton Bros. opens a new store. Neither: Purpleberry Frozen Custard's costs.

Step-by-step explanation:

Short run: Because of dismal sales last year, half of the city's donut shops exit the industry. This is a period of time during which a firm is unable to increase or decrease its amount of capital.

Long run: In order to produce more cookies, Mrs. Meadows asks her third shift to work overtime. Newton Bros. Bagels opens a new store on the other side of town. This lasts at least six months but no longer than one year.

Neither: Purpleberry Frozen Custard has $11,000 of fixed costs and $45,000 of variable costs.

Answer 2

To categorize the given statements, one must understand that the short-run period is when firms cannot change their fixed inputs, whereas the long-run period allows for adjustment in all production factors. The statements describe work overtime in the short run; industry exits and new store openings in the long run; and accounting figures, and a time-bound statement as neither.

Step-by-step explanation:

Determining whether each statement describes the short-run period, long-run period, or neither requires understanding that in the short-run, firms cannot change the usage of fixed inputs like buildings and heavy machinery, while in the long-run, all factors of production including fixed costs can be adjusted. Here's the categorization of each statement:

• Short run - In order to produce more cookies, Mrs. Meadows asks her third shift to work overtime (adjusting variable factors like labor within existing capacity).
• Long run - Because of dismal sales last year, half of the city's donut shops exited the industry (firms adjust their presence in the market which is a long-term decision); Newton Bros. Bagels opens a new store on the other side of town (expansion of physical capital, a long-term change).
• Neither - Purpleberry Frozen Custard has $11,000 of fixed costs and $45,000 of variable costs (this statement is simply an accounting fact and does not describe a time period); This lasts at least six months but no longer than one year (time period given without context of production adjustments).
• Note: The last statement 'This is a period of time during which a firm is unable to increase or decrease its amount of capital' definitionally belongs to the short run but is categorically a general description of the short run rather than a specific example.