Short run loss operating based upon TR, TC, AFV, AFC, & ATC curves

Economics
Tutor: None Selected Time limit: 1 Day

Should a company operate at a loss in the short-run?  Please explain your answer based upon the TR, TC, AFV, AFC, and ATC curves.  A very  simple 3 sentence explanation will work or more. 

Nov 13th, 2014

We can redefine the SR and the LR in terms of costs.

  • Fixed Cost (FC): Cost that does not change with the amount of output.
    • Ex. The cost of land, machines, factories, your lease, your property taxes.
    • No matter how much I produce, it costs me the same.
  • Variable Cost (VC): Cost that changes with the amount of production.
    • Ex. Amount spent on workers, electricity, etc.

If you increase your output, your VC increases.

In the SR, at least one input is fixed, so at least one input cost is fixed. Therefore in the SR, FC>0.
In the LR, there are no fixed inputs, therefore FC=0.
Total Cost (TC) = FC + VC

Hint: Make a separate sheet of paper in your notes where you define all the costs and write the relevant equations.

For now let us focus on the SR.

This section is mainly concerned with macroeconomics.


Nov 13th, 2014

Are you studying on the go? Check out our FREE app and post questions on the fly!
Download on the
App Store
...
Nov 13th, 2014
...
Nov 13th, 2014
Dec 3rd, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer