Question

See Hint Kelly and her family sell beverages outside the stadium during local football matches. Local football matches take place every day because they are the main form of entertainment in the town. Kelly knows that demand for beverages will depend on whom the local team is playing against. Kelly has a large amount of beverages stored at home, and whatever does not get sold one day, will be stored for the next day. Based on the expected demand, Kelly determines how many coolers will be needed for that day and rents the appropriate number of coolers from a local supplier (the only local supplier of coolers in town). The local supplier of coolers is an avid football fan and therefore opens the store only for a few hours early in the morning before the game. Once Kelly has rented the coolers, the store closes until the next day. Which of the following statements are correct about Kelly's business? Choose one or more: A. Once Kelly has rented the coolers and the supplier has closed the store, Kelly is facing a long-run decision. B. Before deciding how many coolers to rent, as long as the supply store is still open, Kelly is facing a long-run decision. C. Specifically for this problem, the long run could be described as roughly 24 hours. D. The long run is never less than 1 year. E. For Kelly's business, the number of beverages is always a variable factor and the number of coolers is always a fixed factor.

Answer 1

Correct answer: (B)

Reason: A long run is characterized by no fixed inputs and all variable inputs.

In case of Kelly, while the number of beverages will always remain variable, the number of coolers will be variable only till the store is open and post that it becomes fixed and cannot be changed.

This means as long as store is open, Kelly face a long run decision.