PRODUCTION Understand Long Run V. Short Run

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Presentation transcript:

PRODUCTION Understand Long Run V. Short Run Understand the Stages of Production Understand Costs

Short Run Only the amount of labor can change Ex: Hire or fire workers

Long Run All factors of production may be changed Ex: Moving to a new building, changing owners

Total Product Changes Add inputs total product goes up Add too many inputs total product will go down

Stages of Production Stage One- Low production Stage 2- Production grows and hit optimal level Stage 3- Production falling

Fixed Costs Costs incurred just by owning a business Ex: Salaries, Rent, Taxes

Variable Costs Costs that change due to operation or output changes Ex: Laid off workers, raises, electricity, shipping

Total Cost Add variable and fixed cost together

Marginal Cost Extra cost of producing one additional unit of product

DO YOU KNOW? What changes in the short run??? What changes in the long run??? The 4 types of cost???

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