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ECON 1000 Lecture Notes - Lecture 4: Sunk Costs, Average Cost, Marginal Cost

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blackotter881
27 Nov 2011
School
York University
Department
Economics
Course
ECON 1000
Professor
George Georgopoulos

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ECON 1000 Full Course Notes
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Document Summary

Lecture fourteen: making decisions in the short and long run. The firm makes man decisions to achieve its main objective: profit maximization. Some decisions are critical to the survival of the firm. Some decisions are irreversible or very costly to reverse. Other decisions are easily reversed and are less critical to the survival of the firm, but they still influence the profit. All decisions can be placed into two time frames. The short run is a time frame in which the quantity of one or more resources used in production is fixed. The time that it takes to change the quantity of the short run is considered to be the short run. For most firms, the capital, called the firms plant, is fixed in the short run. Other resources used by the firm (such as labour, raw materials an energy) can be changed in the short run.

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Related Questions

17) The short run is a time frame in which A) at least one factor of production is fixed. B) the amount of output produced is fixed. C) the firm is not able to hire more workers. D) there is a shortage of most factors of production E) there is not enough time to make all of the decisions necessary to maximize profit.

Describe the Behavior of the profit-maximizing firm. How does the firm account for costs? Define and explain the two types of costs associated with production? How do decisions change from the short-run to the long-run?

To economists, the main difference between the "short-run" and the "long-run" is that:

a) The law of diminishing returns applies in the long run, but not in the short run.

b) In the short run, all resources are fixed, while in the long run, all resources are variable.

c) In the long run, all resources are variable, while in the short run, at least one resource is fixed.

d) Fixed costs are more important to decision making in the long run than they are in the short run.