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Managerial Economics and Strategy, 2/e
book

Managerial Economics and Strategy, 2/e

by Jeffrey M. Perloff, James A. Brander
February 2016
Beginner to intermediate content levelBeginner to intermediate
500 pages
33h 40m
English
Pearson
Content preview from Managerial Economics and Strategy, 2/e

6.3 Long-Run Costs

In the long run, the firm adjusts all its inputs so that its cost of production is as low as possible. The firm can change its plant size, design and build new machines, and otherwise adjust inputs that were fixed in the short run.

Although firms may incur fixed costs in the long run, these fixed costs are avoidable (rather than sunk, as they are in the short run). The rent of F per month that a restaurant pays is a fixed cost because it does not vary with the number of meals (output) served. In the short run, this fixed cost is sunk: The firm must pay F even if the restaurant does not operate. In the long run, this fixed cost is avoidable because the restaurant need not renew its rental agreement. The firm does not have to ...

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Publisher Resources

ISBN: 9780134472553