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Nisha Sharma posted an Question
September 15, 2021 • 22:54 pm
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30 points
30 points
- UGC NET
- Commerce
As we know that long run cost is the summation of different short run cost. then how long run cost is less thhan or equal to short run cost please xplain
as we know that long run cost is the summation of different short run cost. then how long run cost is less thhan or equal to short run cost please xplain
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Rucha rajesh shingvekar
In long run, firm has sufficient time to plan its input to produce output in the least cost-ly way. Long run costs have no fixed factors of production whereas in short run, due to availability of less time, firm has no control over fixed costs. Whether it increases or decreases production, it will have to bear fixed costs which they once incurred. And that's the reason why short run total cost remain greater than or equal to long run total cost curve.
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Priya sarda![best-answer]()
The main difference between long run and short run costs is that there are no fixed factors in the long run; there are both fixed and variable factors in the short run. In the long run the general price level, contractual wages, and expectations adjust fully to the state of the economy. Long-term unit costs are almost always less than short-term unit costs because, in a long-term time frame, companies have the flexibility to change big components of their operations, such as factories, to achieve optimal efficiency. In long run, firm has sufficient time to plan its input to produce output in the least costly way. Long run costs have no fixed factors of production whereas in short run, due to availability of less time, firm has no control over fixed costs. Whether it increases or decreases production, it will have to bear fixed costs which they once incurred.