Although capital is a variable factor in the long run,once chosen it often becomes a fixed factor for a long time.A profit-maximizing firm must therefore select a method of production that is
A)economically efficient at current factor prices.
B)technologically advanced beyond methods currently used.
C)labour intensive,as labour is always a variable factor.
D)economically efficient at current factor prices and sufficiently flexible to adapt to changing factor prices over time.
E)adaptable to wide ranges of output over time.

Question

Quizplus · Accepted Answer

A profit-maximizing firm must select a method of production that is economically efficient at current factor prices and sufficiently flexible to adapt to changing factor prices over time. Although capital becomes a fixed factor in the long run, the firm must still be able to adapt to changes in factor prices and market demand. Therefore, the method of production must be efficient at current prices but also adaptable to changes in the future.

Although Capital Is a Variable Factor in the Long Run,once