# A4.5+Linking+Long+and+Short+Run - < MP = 0(1 Efficient...

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Frank Chapter 9 (Blue Book) If your factory has a production function defined as q = f(K,L) and it operates in Knightian Stage I for labor, what Knightian Stage are you in for Capital?

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Short Run: Period of time where one or more factor’s quantities are fixed, one or more factor’s quantities are variable, and output is variable. a) Knightian Stages i) When X 1 < intersection of ATP and MP (1) Excessive amounts of X 2 for the chosen amount of X 1 ii) Intersection of ATP and MP < X 1 < MP = 0
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Unformatted text preview: < MP = 0 (1) Efficient levels of production, preferably to the point where MP = 0 iii) MP = 0 < X 1 (1) Too much X 1 for the given amount of X 2 iv) Zone I is Zone III for X 2 Once you fix an input, you limit increases in output on the long run graph to movement on a line parallel to the variable input’s axis at a value equal to the quantity of the fixed input. The short run total product graph resides along and perpendicular to that line. Answers III...
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