Distinguish the short run from the long run. Generally, what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?
What will be an ideal response?
The short run is any amount of time in which at least one resource is fixed. In the short run there are some fixed costs. In the long run, nothing is fixed. There are no fixed costs in the long run. Costs of production vary with output in the short run because of increasing and diminishing returns. Costs of production vary with output in the long run because of economies and diseconomies of scale.
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The lowest price Jacob will accept from Harold for a bushel of corn produced in his farm is $5 . The transaction will go through if:
a. Harold's valuation is less than Jacob's. b. Harold's valuation is greater than $5. c. Jacob's opportunity cost is greater than Harold's. d. Jacob's opportunity cost is equal to Harold's.