Which one of the following statements is most accurate?
A) Factors of production can only be over-employed in the short run.
B) Factors of production can only be under-employed in the short run.
C) Factors of production can be over- or under-employed in the long run.
D) Factors of production can be over- or under-employed in the short run.
E) Factors of production are fully employed in the short run.

Question

Quizplus · Accepted Answer

In the short run, factors of production can be over-employed or under-employed, depending on the level of demand and supply. For example, if demand for a product suddenly increases, a company may over-employ factors of production such as labor, leading to higher costs and potentially lower profitability. Alternatively, if demand decreases, a company may under-employ factors of production, such as labor, to reduce costs. In the long run, however, firms have more flexibility to adjust their production processes and factors of production to match demand, so the factors of production are less likely to be over- or under-employed.

Which One of the Following Statements Is Most Accurate