The firm will shut down in the short run if, for all positive levels of output, marginal revenue is less than marginal costs. The firm will continue to produce in the short run if, for all positive levels of output, marginal revenue is greater than or equal to marginal costs. Short Run Costs: The long-run and short-run distinction comes from how much time it takes for firms to adjust their production based on changes in demand. In the short run, only those inputs that can be changed quickly are varied while keeping other factors unchanged; but at some point these quick adjustments become costly due to large amounts of fixed cost investment that has already been made in plant equipment, raw materials supplies and labor training. For example, a factory might need weeks before they could increase their output by 50%. In contrast with this scenario where there’s not enough time between current

LEAVE A REPLY

Please enter your comment!
Please enter your name here