Short-Run and Long-Run Costs Flashcards

Name: Shalom Education
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What does "short run" mean in production?

A period when at least one input, like factory size, cannot be changed.

A period when a firm can change all inputs, so nothing is fixed.

Because some inputs are fixed, creating fixed costs such as rent.

No. All costs are variable because all inputs can be changed.

By using more variable inputs, like labour and raw materials.

Fixed costs are spread over more units, so the cost per unit drops.

Extra workers and materials crowd limited capacity, so each extra unit costs more. This is called diminishing returns.

The lowest cost per unit at each output when the firm can change all inputs.

It traces the lowest points of many SRAC curves for different factory sizes.

By changing fixed inputs in the long run, like new machines or a bigger factory.

No. It varies by industry and depends on how long it takes to change all inputs.