Which of the following inputs is normally considered to be fixed in the short run?
A labor
B money
C capital
D All of the above.
The correct answer and explanation is:
Correct Answer: C. Capital
Explanation (300 words):
In economics, particularly in the theory of production, the short run refers to a time period during which at least one input in the production process is fixed—meaning it cannot be changed quickly or easily.
Among the options given:
- A. Labor: In the short run, labor is usually considered a variable input. This means firms can adjust the number of workers they hire, the hours worked, or the intensity of labor. For example, a company might hire more employees or schedule overtime to meet higher demand.
- B. Money: Money is not a direct input in the production function like labor or capital. It is a medium of exchange used to acquire resources. While access to money (financing) can influence production decisions, it is not classified as a “fixed” or “variable” input in the traditional sense of production theory.
- C. Capital: Capital—which includes machinery, buildings, and equipment—is typically considered a fixed input in the short run. This is because it takes time and significant investment to build new factories or purchase new machines. Firms cannot easily adjust capital in response to changes in market demand in the short run.
Therefore, capital remains constant, while firms adjust variable inputs like labor to change production levels.
- D. All of the above: This is incorrect because not all the listed items are typically fixed. Only capital is considered fixed in the short run.
Summary:
In the short run, capital is fixed because it takes time and resources to adjust. Labor is variable, and money is not classified as an input in the traditional production sense. Understanding which inputs are fixed or variable helps firms make efficient production and cost decisions.