Workshop8.P&R.KEY - Please comment"In the short r un...

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Please comment: "In the short run only variable costs are relevant. But in the long run, all costs are variable." The short run is the time frame in which there are fixed factors of production. In this time period, the firm must focus on variable costs to make any needed changes. So, in a way, they are the only relevant costs. In the long run, all factors of production are adjustable (or variable). This means that a manager has significant options when changes are necessary. For instance, one could consider a retail clothing store. In the short run, the manager could not change the capital utilized (the store), but he/she could change the amount of labor utilized and the amount of inventory ordered. The relevant factors in the short run are thus the variable factors. The fixed factor (the building) is not relevant, however. In the long run, on the other hand, the manager could choose to utilize a different building, employ or eliminate more workers, and vary all aspects of production. All factors are essentially variable. Why do production functions, or total product curves, most often change their slope
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This note was uploaded on 03/01/2010 for the course ECON 30601E taught by Professor Morvey during the Summer '09 term at Buena Vista.

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Workshop8.P&R.KEY - Please comment"In the short r un...

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