In the long run, plant capacity can be:

• A. Fixed
• B. Varied but only within narrow limits
• C. Altered
• D. Reduced to maintain efficiency

Answer: (C)

In the long run, a firm can adjust all inputs, including the size of its plant and the level of its equipment. Capacity is the maximum output a plant can produce with current technology, so when everything is variable, that capacity can be changed—expanded or reduced as needed. For example, if demand increases, a company might add production lines or build a larger facility to raise capacity. If demand falls, it might downsize or repurpose facilities to lower capacity. This flexibility distinguishes the long run from the short run, where some inputs are fixed and capacity can’t be changed as easily. That’s why the correct idea is that plant capacity can be altered.