Given the information below, determine if the firm is operating in the short run

Question

Given the information below, determine if the firm is operating in the short run or the long run.

1. old york & company, a women's retailer, is not under a wage contract with its employees, but it is currently in a one year lease at its mall location.

2. Halle Sanson, a nail polish manufacturer, has a vertical aggregate supply curve.

3. Ruby Wednesdays Restaurants is currently paying its managers a fixed salary in a six month contract.

4. General Auto is producing at a fixed full-employment level of production.

Explanation / Answer

1. OLD YORK IS RUNNING UNDER SHORT RUN WHERE THE LEASE RENT IS FIXED AND FACTORS ARE VARIABLE.

2. IN THE LONG RUN WE FIND THE AGGREGATE SUPPLY CURVE TO BE VERTICAL DUE TO THE FACT THAT NONE OF THE FACTORS OF PRODUCTION IS FIXED RESULTING IN A OPTIMAL LEVEL OF OUTPUT WHICH CANNOT BE CHANGED MUCH.

3. RUBY WEDNESDAY IS AGAIN OPERATING IN A SHORT RUN WHERE SALARY IS FIXED AND OTHER FACTORS OF PRODUCTION ARE VARIABLE.

4. THE FULL EMPLOYMENT LEVEL SHOWS THAT THE FIRM IS OPERATING IN THE LONG RUN AND THERE ARE NO ECONOMY WIDE SHORTAGES OR SURPLUSES.

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