Question

What’s the law of diminishing marginal productivity?

What are the costs in the short run?

What are the costs in the long run?

Answer 1

1. Diminishing marginal productivity usually happens when beneficial improvements are made to input variables impacting overall productivity.The Law of Diminishing Marginal Productivity states that, when an advantage is obtained from a factor of output, the productivity obtained from each subsequent unit produced will only increase slightly from one unit to the next.Factory managers find lower marginal output while increasing variable inputs to improve efficiency and profitability.

2. Short-run costs are incurred in real time during the manufacturing cycle. Fixed costs have little effect on short-term operations, only variable costs and revenues affect short-term growth. Variable cost varies with production. Examples of variable costs include workers ' salaries and raw materials prices. Short-term costs rise or decrease on the basis of variable costs as well as the rate of output. If a company handles its short-term costs well over time, it would be more likely to succeed in achieving the long-term costs and objectives that it needs.

Long-run costs are incurred as companies adjust output rates over time in response to anticipated economic gains or losses. There are no fixed factors of output in the long run. Land, labor, capital goods and investment all differ in order to meet the long-term cost of manufacturing a product or service. The preparation and implementation process for producers is a long-term one. To order to make production decisions, they evaluate the actual and expected business situation. Efficient long-term costs shall be borne when the combination of products produced by a firm results in the desired quantity of goods at the lowest possible cost.