Over the _ run, selling prices must cover both fixed and variable costs. Which term correctly completes the sentence?

• A. long
• B. short
• C. intermediate
• D. very short

Answer: (A)

Verified step by step guidance

1. Understand the difference between short run and long run in microeconomics: In the short run, some costs are fixed and cannot be changed, while in the long run, all costs are variable and firms can adjust all inputs.
2. Recall that in the short run, firms must cover their variable costs to continue operating, but they do not necessarily have to cover fixed costs immediately.
3. Recognize that over the long run, firms must cover both fixed and variable costs to remain in business, because fixed costs become avoidable as firms can adjust all inputs or exit the market.
4. Identify that the sentence 'Over the ___ run, selling prices must cover both fixed and variable costs' refers to the long run, where all costs are relevant for pricing decisions.
5. Conclude that the correct term to complete the sentence is 'long' because only in the long run must prices cover total costs (fixed plus variable).