Key Cost Curve Definitions
- The short-run is that period of time in which at least one factor of production is fixed
- E.g. It is difficult to change machinery or the number of factories in the short run, but that can be achieved in the long run
- The variable factor of production that is usually added to production is labour, as it is easy to hire new workers
- The long-run is that period of time in which all of the factors of productions are variable
- This is also called the planning stage, as firms can plan for increased capacity and production
- This is also called the planning stage, as firms can plan for increased capacity and production
Marginal, Average & Total Returns
Concept |
Explanation |
Example |
Marginal returns |
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Total returns |
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Average returns |
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