Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 22: Q. 22.1LO (page 486)

Discuss the difference between the short run and the long run from the perspective of a firm.

Short Answer

Expert verified

Short-run: Firms' profits is positive, negative, or zero.

Long-run: The worth is high enough to finish in positive profit.

Step by step solution

01

Given Information

Short run: the amount of companiesin an exceedingly very very given industry is fixed.
Long run: the price is solely too high enough yet to point out in such a profit.

02

Explanation 

The Short Run: Firms will produce ifthe value a minimum of covers variable costs, since fixed costs have already been paid and, as such, don't enter the decision-making process. Firms' profits is positive, negative, or zero.

The Long Run: Firms will enter a market if the worth is high enough to finish in positive profit. Firms will exit a market if the worth is low enough to guide to negative profit. If all firms have the identical costs, firm profits are zero within the long run in an exceedingly competitive market.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Describe production at a firm and explain why the marginal product of labor eventually declines as more units of labor are employed.

An electricity-generating company confronts the following long-run average total costs associated with alternative plant sizes. It is currently operating at plant size G.

a. What is this firm's minimum efficient scale?

b. If damage caused by a powerful hurricane generates a reduction in the firm's plant size from its current size to B, would there be a leftward or rightward movement along the firm's long-run average total cost curve?

The short-run production function for a manufacturer of portable power banks is shown in the table below. Based on this information, answer the following questions.

a. Calculate the average product at each quantity of labor.

b. Calculate the marginal product of labor at each quantity of labor.

c. At what point does marginal product begin to diminish?

In an effort to reduce their total costs, many companies are now replacing paychecks with payroll cards, which are stored-value cards onto which the companies can download employees' wages and salaries electronically. If the only factor of production that a company varies in the short run is the number of hours worked by people already on its payroll, would shifting from paychecks to payroll cards reduce the firm's total fixed costs or its total variable costs? Explain your answer.

In your view, is a retailing firm's shrink likely to contribute most to its fixed costs or variable costs? Explain your reasoning.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free