Discussion 3 - Due Feb 8, 2015
What is the difference between the short run and the long run period? Imagine that you a manager for a Burger King outlet and your Regional Manager has asked you to prepare a strategic report. In your report, the regional manager wants you to discuss the factors of production that your store can change in the short run and long run? Discuss the short run and long run production factors. Why are these short run and long run factors, respectively? What are the costs associated with these short run and long run factors? Explain. Your answer must be not less than 250 words.
The difference is that a short run period is the conceptual time period in which at least one factor of production is fixed in amount and others are variable in amount. Costs that are fixed, say from existing plant size, have no impact on a firm's short-run decisions, since only variable costs and revenues affect short-run profits . In the long run, firms change production levels in response to (expected) economic profits or losses, and the land, labor, capital goods and entrepreneurship vary to reach associated long-run average cost. The transition from the short run to the long run may be done by considering some short-run equilibrium that is also a long-run equilibrium as to supply and demand, then comparing that state against a new short-run and long-run equilibrium state from a change that disturbs equilibrium, say in the sales-tax rate, tracing out the short-run
