Question

3. Assume you are a senior manager of a cell phone provider such as TELUS, Rogers or Bell.

1. How might your (cell phone provider) costs of production be affected in the short-run and long-run? (approx. 230 words)

Answer 1

Short run costs are accumulated in the real time throughout the production process. Fixed costs have no impact of short run costs, only variable costs and revenues affect the short run production. Variable costs change with the output. Examples of variable costs include employee wages and cost of raw materials​. The short run costs increase or decrease based on variable costs as well as the rate of production. If a firm manages its short run cost well over time, it will be more likely to succeed in reaching the desired long run costs and goals.

Long run costs are accumulated when firms change production levels over time in response to expected economic profits or losses. In the long run there are no fixed factors of production. The land, labour, capital goods, entrepreneurship all vary to reach the long run cost of producing a good or service. They analyze the current and projected state of the market in order to make production decisions. Efficient long run costs are sustained when the combination of output that a firm produces results in the desired quality of the goods at the lowest possible cost. Examples of long run decision that impact a firm's costs include changing the quantity of production, decreasing or expanding a company and entering or leaving a market.

These are the possible ways through which cost of production might be affected in short run and in long run.