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11. How long is the "short-run" time period in the economic analysis of the market?

a. three months or one business quarter

b. total time in which sellers already in the market respond to changes in demand and equilibrium price

c. total amount of time it takes new sellers to enter the market

d. total amount of time it takes original sellers to leave the market

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A firm finds there is a sudden increase in the demand for its product. In the short run, it must operate longer hours and pay higher overtime wage rates. In the long-run, however, the firm can install more machines and operate them for various periods of time. Which do you think will be lower, the short-run or long-run average cost of the increased output? How is your answer affected by the fact that the long-run average cost included the cost of the new machines the firm buys, while the short-run average cost includes no machine purchases? Explain your answer.

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