Changes

A typical firm can initially expect average unit costs to decline as it increases inputs (workers, facilities, etc.) from zero.  This is an increasing return to scale.  But at some point, call it when input = X, those increasing returns disappear and the company can only obtain constant returns to scale.  It has attained its “minimum efficient scale” at that point.  It can continue to increase its inputs, but its output only increases by the same amount as its input.  Ultimately, the company will find that increasing inputs further does not even increase output much.  It has too many workers or facilities at that point, and it begins to have decreasing returns to scale.

A typical firm can initially expect average unit costs to decline as it increases inputs (workers, facilities, etc.) from zero.  This is an increasing return to scale.  But at some point, call it when input = X, those increasing returns disappear and the company can only obtain constant returns to scale.  It has attained its “minimum efficient scale” at that point.  It can continue to increase its inputs, but its output only increases by the same amount as its input.  Ultimately, the company will find that increasing inputs further does not even increase output much.  It has too many workers or facilities at that point, and it begins to have decreasing returns to scale.

==Costs==

==Costs: Long Run Is Cheaper than Short Run==

Well-planned long-run changes should always be more efficient than short-run adjustments.  For example, it should always be cheaper to hire a new employee at the basic wage than to pay time-and-a-half for existing employees to work overtime.  It should always be more efficient to build a facility the way you need it than to pay someone else to rent a facility that is not exactly what you need.  There may be reasons why you do not want to take a risk on a new facility, but efficiency is always on the side of long-run expenses.

Well-planned long-run changes should always be more efficient than short-run adjustments.  For example, it should always be cheaper to hire a new employee at the basic wage than to pay time-and-a-half for existing employees to work overtime.  It should always be more efficient to build a facility the way you need it than to pay someone else to rent a facility that is not exactly what you need.  There may be reasons why you do not want to take a risk on a new facility, but efficiency is always on the side of long-run expenses.

That is true in life also.  When you make decisions, you are better off thinking about the long-run consequences.  Many mistakes are caused by short-term thinking.  If drug addicts considered the long-run impact of their decision to take drugs, then they would save themselves from dying in a gutter some day or ending up homeless in Manhattan.

That is true in life also.  When you make decisions, you are better off thinking about the long-run consequences.  Many mistakes are caused by short-term thinking.  If drug addicts considered the long-run impact of their decision to take drugs, then they would never try drugs.  By avoiding drugs they would save themselves from dying in a gutter some day or ending up homeless.

Exercise is not always the most pleasant activity in the short run.  But its benefit is substantial for the long run.

Exercise is not always the most pleasant activity in the short run.  But its benefit is substantial for the long run.

Jesus was not focusing on the short run in picking His Apostles.  He was planning for the long run.

 

Jesus focused on the long run in many ways.  Christianity talks in terms of eternity, while anti-Christians talk in terms of the short run, or even the past.

Economically, long-run unit costs are always less than or equal to short-run unit costs at all levels of output Q.  If you graph unit cost on the y-axis and output Q on the x-axis, then the curve for the long run is the shape of a big bowl (or “U” with a flattened bottom): downward sloping for small Q, flat for medium Q, and then upward sloping for large Q.  That reflects the increasing returns to scale as production begins, constant returns to scale when production is medium, and then decreasing returns to scale as production becomes very large.

Economically, long-run unit costs are always less than or equal to short-run unit costs at all levels of output Q.  If you graph unit cost on the y-axis and output Q on the x-axis, then the curve for the long run is the shape of a big bowl (or “U” with a flattened bottom): downward sloping for small Q, flat for medium Q, and then upward sloping for large Q.  That reflects the increasing returns to scale as production begins, constant returns to scale when production is medium, and then decreasing returns to scale as production becomes very large.

If plotted on the same graph, the short-run unit costs would be little bowls (or “U”s) are sitting on top of the bigger curve of long run costs.  SHORT-RUN UNIT COSTS NEVER DIP BELOW LONG-RUN UNIT COSTS.  That is because short-run unit costs are always equal or greater than long-run unit costs.

If plotted on the same graph, the short-run unit costs would be little bowls (or “U”s) are sitting on top of the bigger curve of long run costs.  SHORT-RUN UNIT COSTS NEVER DIP BELOW LONG-RUN UNIT COSTS.  That is because short-run unit costs are always equal or greater than long-run unit costs.

==Accounting==

==Accounting==