Explain the difference between production in the short run and production in the long run.

Expert Solution

Answer:-

The short run production function:-

The short run production function is one in which at least is one factor of production is thought to be fixed in supply.
The short run production function is Law of variable proportion.
In the short run production Scale of production is no change in scale of production.
The Factor-ratio is Changes
In the short run production function are barriers to entry and the firms can shut down but cannot fully exit.

Also, the short run production function refer to time period, in which the installation of new plant and machinery to increase the production level is not possible.

The Long-run production function:-

The Long run production function refers to that time period in which all the inputs of the firm are variable. It can operate at various activity levels because the firm can change and adjust all the factors of production and level of output produced according to the business environment.
The Long run production function is Law of returns to scale
The Long run production function is Scale of production Change in scale of production.
The Factor-ratio is not change.
In the Long run production function Firms are free to enter and exit.

Also, The Long run production function is one in which the firm has got sufficient time to instal new machinery or capital equipment, instead of increasing the labour units. he production function can be described as the operational relationship between the inputs and outputs.

Rahul Sunny answered 2 years ago

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