How Producers act in the Long Run

Producers have Long Run Costs Recall that: > In the short run some costs are fixed. > In the long run fixed costs become variable. > Consequently, a firm’s long-run cost curves differ from its short-run cost curves. Long-Run Cost Minimization Given that firms will select the most efficient method of production they will chose … Continue reading How Producers act in the Long Run

Diminishing Marginal Product of Labour

The assumption of diminishing marginal product of labour means that, in order to work more, workers must be offered a higher real wage. We can use this assumption to derive the labour demand curve. This concept, the amount that output increases for a unit increase in labour input, is called the marginal product of labour … Continue reading Diminishing Marginal Product of Labour