CFA Practice Question

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CFA Practice Question

Compared to the short-run demand for labor, the long-run demand for labor is likely to be ______.

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...
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