Purchase Solution

Long Run,Short Run,Law of diminishing Marginal return

Not what you're looking for?

Ask Custom Question

Subject: Long Run,Short Run,Law of diminishing Marginal return
Details:
Define Short Run and Long Run. Discuss three types of decisions that firm have to take in Long Run.

State the Law of Diminishing Marginal Returns. Differentiate between Diminishing Returns to Factors and Diminishing Returns to Scale.

Attachments
Purchase this Solution
Solution Summary

The expert examines the long run, short run and law of diminishing marginal return. The three types of decisions that firms have to take in the long run are found.

Solution Preview

Define Short Run and Long Run. Discuss three types of decisions that firm have to take in Long Run.
The short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. The long run is a period of time in which the quantities of all inputs can be varied.
The long run and the short run do not refer to a specific period of time such as 3 months or 5 years. The difference between the short run and the long run is the flexibility decision makers have.

In the short run, sellers can make losses in a competitive market. This happens if they have fixed costs and the market price is too low relative to their average costs.

However, in the long run firms can change all inputs and thus they can eliminate fixed costs by leaving the industry. This implies that profits must never be negative in the long run.

The flip side is that in a competitive market new firms can enter the market. This ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Stages of Production - Law of diminishing Returns

    Suppose the price of the output falls to $7.50.What do you think would be the short-run impact on the firm's production? The long-run impact?

  • Diminishing Marginal Productivity

    Does this case illustrate the law of diminishing marginal productivity?

  • Finding Short Run, Long Run movement



    Long Run: Because none of the inputs under control of a firm are fixed in the long run, the law of diminishing marginal returns does not apply.

  • Diminishing Returns

    150808 Diminishing Returns: Example Problem Discuss the concept of the law of "diminishing returns" and why does it occur only in the short run? Differentiate between "the long run return to scale" and "economies of scale."

  • Short vs. long run, Diminishing Product, Fixed vs. Variable

    The Law of Diminishing Marginal Product 2. Short run vs. long run 3. Fixed costs vs. variable costs All three answers give detailed examples.

  • Economics Concepts - Production and Cost

    The shape of the short run marginal cost curve is determined by law of diminishing marginal returns. The shape of the long run marginal cost curve is flatter than the short term marginal cost curve.

  • Production Process Multiple Choice Questions in Economics

    in the short run, MC always increases. d. the law of diminishing returns takes effect. Answer: d. the law of diminishing returns takes effect The law of diminishing return implies eventually increasing marginal cost. 3.

  • Problems with measuring cost

    if marginal cost is less than marginal revenue (added revenue per additional unit of output; also related to this, is The law of diminishing marginal returns to variable factors which are related to the short run.

  • Short-Term or Long-Term Diminishing Marginal Productivity

    319115 Short-Term or Long-Term Diminishing Marginal Productivity Do you think diminishing marginal productivity is a short term phenomenon, a long term phenomenon or both? Diminishing rate of marginal productivity (DRMP) is short term phenomenon.

View More Related Solutions