Which of the following represents the key difference between the short run and the long run?
A. In the long run, the firm makes commitments to a certain type of production technology which are represented as fixed costs in the long run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the short run.
B. In the short run, the firm makes commitments to a certain type of production technology, which are represented as fixed costs in the short run. For example, they have signed a lease on a particular production facility. These fixed costs do not exist in the long run.
C. The short run refers to less than two years and the long run is over two years.
D. In the short run, all costs are fixed but in the long run, capital costs are variable.
Answer: B
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