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Costs In The Long-Run - School Essays

Costs In The Long-Run

Just as some costs are fixed and others are variable so are the
inputs, or resources, or, factors of production used by the firm and this
has an impact on its short and long run operations. These time periods
(the short and the long run) do not refer to specific, chronological time
of hours, days, weeks, months or years. Rather they are periods of
adjustments.

The Long-Run is that time period in which all factors of production
are variable i.e. the firm can increase its productive capacity by changing
the scale of its operation. For example, if a printing press can only
deal with 1,000 sheets per minute then it does not matter whether you
employ 1, 2 or 5 men to work with it, ...

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to the scale of production and decisions in the short run are to
do with choosing an output level within the capacity constraint.

With this introduction to the firms costs and output decisions we
can now apply them to see how firms decide on the output to produce in
order to maximise profits, the combination of actors of production to
employ and how output changes in response to employing more or a variable
factor in combination with a fixed factor; (i.e. the law of diminishing
returns) and the scale of operations to achieve optimum production. (i.e.
the economies and dis-economies of scale)

Since there are no fixed factors in the long-run, there are no
long-run fixed costs. All costs then, in the long-run are variable costs. ...

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Costs In The Long-Run. (2004, May 13). Retrieved December 23, 2024, from http://www.essayworld.com/essays/Costs-In-The-Long-Run/7752

"Costs In The Long-Run." Essayworld.com. Essayworld.com, 13 May. 2004. Web. 23 Dec. 2024. <http://www.essayworld.com/essays/Costs-In-The-Long-Run/7752>

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PAPER DETAILS

Added: 5/13/2004 02:44:45 PM
Category: Economics
Type: Premium Paper
Words: 330
Pages: 2

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