Which of the following assumptions is important in studying production in a perfectly competitive market?

Question

In the long run, all inputs are fixed.

In the short run, no variables are fixed.

Only one variable input is used, and that is electricity.

In the short run, capital is fixed.

Answer 1

In studying production in a perfectly competitive market, the most important assumption from the options provided is:

In the short run, capital is fixed.

In the short run, firms can vary their labor input (a variable input) but cannot change their capital stock (a fixed input). This leads to different production behaviors in the short run compared to the long run, where all inputs can be adjusted.