Презентация на тему Short run and long run costs. relationships between them.

run" are not broadly defined as a rest of

time. Rather, they are unique to each firm.

Long Run Costs

Long run costs are accumulated when firms change production levels over time in response to expected economic profits or losses. In the long run there are no fixed factors of production. The land, labor, capital goods, and entrepreneurship all vary to reach the long run cost of producing a good or service. The long run is a planning and implementation stage for producers. They analyze the current and projected state of the market in order to make production decisions. Efficient long run costs are sustained when the combination of outputs that a firm produces results in the desired quantity of the goods at the lowest possible cost.

decisions that impact a firm's costs include changing the

quantity of production, decreasing or expanding a company, and entering or leaving a market. Examples also include the rental costs of buildings; the costs of leasing or purchasing capital equipment; the annual business rate charged by local authorities; the costs of employing full-time contracted salaried staff; the costs of meeting interest payments on loans; the depreciation of fixed capital (due solely to age) and also the costs of business insurance.

real time throughout the production process. Fixed costs have

no impact of short run costs, only variable costs and revenues affect the short run production. Variable costs change with the output. Examples of variable costs include employee wages and costs of raw materials. The short run costs increase or decrease based on variable cost as well as the rate of production.

a firm manages its short run costs well over

time, it will be more likely to succeed in reaching the desired long run costs and goals.

is determined by the sum of FC and VC.

Fixed cost for a some period did not change, but it does not mean that it can not be changed for another economic period. Variable cost is increasing as number of products increases too.