- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 5. Understanding Economies and Diseconomies of Scale
CFA Practice Question
Compared to the short-run demand for labor, the long-run demand for labor is likely to be ______.
B. more elastic
C. of the same elasticity
A. perfectly elastic
B. more elastic
C. of the same elasticity
Correct Answer: B
In the long run, the firm has more choices. It can change its input mix (the input-substitution effect) or change its scale of production (the output effect), and thus long-run labor demand will be more elastic than short-run labor demand.
User Contributed Comments 3
| User | Comment |
|---|---|
| ilgibe | all costs become variable in the long run |
| dwadd | it seems like everything becomes more elestic in the long run, b/c in the LR, you'll have more choices. |
| gill15 | thats true...long run supply is more elastic as well....producers in the short run will face more restricitions on their ability to alter output... |