The short run is “A production period of time in which at all inputs in the production process are fixed, meaning the quantity of output itself is fixed.” (Glossary.econguru.com, 2014) and the long term is defined not as a specific period of time, but is instead defined as the time horizon needed for a producer to have flexibility over all relevant production decisions." therefore in the short run certain forces over the factors of production can vary such as promotion of labor, wages increase and various other factors but the scale of production in which a firm operates cannot be changed in the short run such as buying or changing factory or establishment location, buying of heavy machinery. For firms to achieve these operational goals; it is only possible in the long run where such investments can be done freely; Therefore it is reasonable to say that a firms operational scale can be seen by how much influence in terms of change it has over its factors of production. A firm operating on a very big scale such as Porsche would have problems to change its factors of production in the short-run such as opening a new plant compared to some local vendor who similarly would achieve this as a long run goal but would have different time lengths compared to Porsche. The aim of an organization is to increase its economies of scale which is "Economies of scale is an economics term that means large entities, whether businesses, non-profits or governments, can reduce costs simply because of their size. This gives them a competitive advantage over smaller companies." (Amadeo, 2014), but besides economies of scale it is important that a firm achieves increasing returns of scale. "There is no fixed factor of production in the long run. The law of returns to scale describes the relationship between variable inputs
Managerial Economics |
Assignment 3 Week 3 |
Yesenia Vazquez |
First, and for most one must describe the meaning behind short-run production. The short run is a time period where at least one factor of production is in fixed supply. A business has chosen its scale of production and must stick with this in the short run. We assume that the quantity of plant and machinery is fixed and that production can be altered by changing variable inputs such as labor, raw materials…
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…
long run, the actual inflation rate depends primarily on: a. the expected inflation rate b. the Phillips curve trade-off c. the rate of growth of the quantity of money d. the unemployment rate
ANS: C 3. The Phillips curve implies that the economy faces a: a. long-run trade-off between price inflation and the level of real wages b. short-run trade-off between inflation and unemployment c. short-run trade-off between the actual unemployment rate and the natural rate of unemployment d. long-run trade-off…
total factor productivity that raises the expected future marginal product of capital, then in the long-run, this would cause:
a. A decrease in the real interest rate.
b. An increase in the real interest rate.
c. No change in the real interest rate.
d. An indeterminate change in the real interest rate.
Answer: Increase in total factor productivity has two effects, both long-run and short-run effects. First, increase in total factor productivity will shift the LRAS curve to the right. Second,…
2. Explain the different options a firm has to minimize losses in the short run.
A firm in perfect competition has no control over the market place. Sometimes that price may be so low that a firm loses money no matter how much it produces. Such a firm can either continue to produce at a loss or temporarily shut down.
3. (The Short-Run Firm Supply Curve) Each of the following situations could exist for a firm in the short…
of macroeconomics, there are two important conclusions. The first conclusion is when looking into the long term; the standards of living are determined by the country’s capability to produce goods and services. The second conclusion is seen in the short term when the goods and services that a country produces are influenced by aggregate demand. These conclusions work in tandem with each other in order to provide a country with a high standard of living and an economic surplus; that is why it is important…
values ranging from 0.75 to 3.25. Those with marginal costs below 2.00 had a producer surplus. Those with marginal costs above 2.00 did not sell their product. Answers to Problems and Exercises (Short-Run Profit Maximization) A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firms product is 150. Output FC VC TC TR Profit/Loss 0 100 0 ___ ___ ___ 1 100 100 ___ ___ ___ 2 100 180 ___ ___ ___ 3 100 300 ___ ___ ___ 4 100…
cover up to 20 % (including the paper and binding the book), would create the possibility of an increased profit margin.
Book-In-Time solution provided by Xerox is one of the most efficient solutions for publishing companies running on demand for short-run books. The advantage…
is MC =
4Q. The cost function is the same in the short run and the long run except that the 800 is sunk
in the short run and is a quasi fixed cost in the long run (it can be avoided by exiting the
industry). An unlimited number of firms can enter this competitive industry with this same
cost function. Derive and graph the short run supply curve for an individual firm. Derive and
graph the long run supply curve for the industry.
The short run supply curve for a firm is the portion of its SRMC…