Question

1. Suppose the recycling company is required, by contract, to process exactly 10,000 tons of plastic in a year. Because the company cannot change its facility size within a year, it must choose the optimal staffing level to process this amount. Assuming that the company is a short-run profit-maximizing company, it must be the case that in a year, the company hires the number of workers that Choose one:

A. minimizes the short-run amount of time required to process 10,000 tons of plastic.

B. minimizes the short-run cost of processing 10,000 tons of plastic.

C. minimizes the short-run amount of space required to process and store 10,000 tons of plastic.

2. Suppose the wage of the workers and the lease per square foot are the same in the long run as they are in the short run. Considering your answer to the question in Part 1 above, you would know that processing 10,000 tons of plastic per year in the long run will cost  

A. at least as much as it cost the company to process this amount per year in the short run.

B. At most as much as it cost the company to process this amount per year in the short run.

C. certainly more than it cost the company to process this amount per year in the short run

D. certainly less than it cost the company to process this amount per year in the short run

Answer 1

1) B. minimizes the short-run cost of processing 10,000 tons of plastic.

because the company cannot change its facility size within a year so it will choose that level of staff which will be able to produce and store in the given space with the minimum cost.The short-run is the time horizon over which factors of production are fixed, except for labor, which remains variable.

2) D. certainly less than it cost the company to process this amount per year in the short run

In the long run, firms are able to adjust all costs, whereas, in the short run, firms are only able to influence prices through adjustments made to production levels.Over the long run, a firm will search for the production technology that allows it to produce the desired level of output at the lowest cost. The short-run, on the other hand, is the time horizon over which factors of production are fixed, except for labor, which remains variable. There are other factors as well that may raise the cost. but overall long run costs are not more than the short run costs. but in general long run costs are lesser.