The correct answer is: B. market period
The market period is the shortest period of time in which all factors of production are fixed. This means that the firm cannot change its plant size, equipment, or the number of workers it employs. In the market period, the firm can only change its output by varying the amount of variable inputs it uses.
The figure shows the short-run average cost (SRAC) and short-run marginal cost (SRMC) curves of a firm. The SRAC curve is U-shaped because of the law of diminishing returns. The SRMC curve cuts the SRAC curve at its minimum point. This is because the firm can only produce at its lowest average cost when it is producing at its efficient scale.
The firm will produce at the point where the SRMC curve intersects the demand curve. This is the point of equilibrium, and it determines the price and output of the firm in the market period.
The other options are incorrect because:
- The long run is a period of time in which all factors of production are variable. This means that the firm can change its plant size, equipment, and the number of workers it employs. In the long run, the firm can only change its output by varying the amount of all inputs it uses.
- The secular run is a very long period of time in which all factors of production are variable, and the technology of production is also changing. In the secular run, the firm can change its output by varying the amount of all inputs it uses, and by changing the technology of production.