Production Choices and Costs: The Long Run

Read this section to learn about the behavior of the producer in the long run. Take a moment to read through the stated learning outcomes for this chapter of the text, which you can find at the beginning of each section. These outcomes should be your goals as you read through the chapter. Attempt the "Try It" problems at the end of the section before checking your answers.

TRY IT!

  1. Suppose Acme Clothing is operating with 20 units of capital and producing 9 units of output at an average total cost of $67, as shown in Figure 8.8 "Marginal Cost, Average Fixed Cost, Average Variable Cost, and Average Total Cost in the Short Run". How much labor is it using?
  2. Suppose it finds that, with this combination of capital and labor, MPK/PK > MPL/PL. What adjustment will the firm make in the long run? Why does it not make this same adjustment in the short run?