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Explain how a firm may transition from the short-run production decision to the long-run production decision....

  1. Explain how a firm may transition from the short-run production decision to the long-run production decision. In your explanation, us applicable graphs to illustrate short-run and long-run laws in operation.

(i) Explanation (ii) as part of your explanations, draw and properly label a short-run production-decision graph and long-run production-decision graph for illustration purposes).

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Answer #1

The transition of short-run production decision to a long-run production decision

In the theory of production, the production decision is dependent on the factor availability and allotment. when we work in the short-run condition the limitation is about factor availability. so short-run production is dependent on fixed cost and variable cost. so short-run production function is a limited period of operational time with factor scarcity. in long -run all the factors of productions are variable in nature. so the periodic fluctuation is not available and the firm can obtain a normal profit. A long-run cosrve is the horizontal combination of shortrun curves. so it is also known as envolope curve.

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