In order to understand production costs, it's important to understand that costs work differently depending on how much time a business has to adjust to changes. Some periods of time are too short for a firm to make all the adjustments it might like. We can think of three different time frames for which production costs decisions can be made.

   The Short Run is the clever name someone came up with for, well... the short run. Actually, it refers to a period of time that is too short for a firm to change at least one of the factors it uses in producing its output. Depending on the kind of business we're thinking of the factor which is fixed in the short run could be machinery, location, or factory size. During the short run firms which wish to change output can alter some factors but not others.

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