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Economics: Important Managerial Tasks

Question 1:
Why is it important for managers to understand both short run and long run supply and demand? Please provide one hypothetical or real life example that illustrates your response.

Question 2:
Under what circumstances would it be appropriate to resort to plant or company closings or layoffs? What is a good guideline to follow and explain how it may help a manager make this type of decision.

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Question 1:

It is important for mangers to understand both short run and long run demand and supply. The reason is that if the demand is such that the price that a firm gets in the short run is more than the total average cost, the company makes a profit. The supply is determined by the costs. If however, the short term demand is such that the price is greater than the average variable cost but lower than the average total cost the company makes a loss but should continue production because the production ...

Solution Summary

In 330 words, including references, this solution provides an excellent discussion on these two managerial questions pertaining to economics.