Economic Discussion Posts

Student’s Name

Institutional Affiliation

Discussion Post 1

Distinguish between the short run and the long run. What will differentiate the short run and the long run?

Short-run refers to a period where a variety of variable inputs exists with at least one fixed input. On the other hand, the long run refers to a time where everything varies with no fixed input. Sarah’s bakery short run are the employees she has hired and capable of trusting them to work for her while she runs other functions within the bakery. Long run, however, will include long-term employees who are focused and intended to bring success at Sarah’s bakery.

Describe fixed inputs and variable inputs. Which inputs are fixed and which are variable in Sarah’s bakery?

Fixed inputs refer to resources to be used for production and cannot be valued in the short run while variable inputs can be decreased or increased within the short run. Some of the fixed inputs at Sarah’s bakery include the four ovens and other equipment. Employees will be considered as a variable input since a business is entitled to change and reduction of employees if expenses precede profits. Furthermore, wages and electricity will be considered variable inputs.

Why would marginal productivity decline after a certain level of production?

According to the law of diminishing returns, a gained advantage in a factor of production will typically decrease marginal productivity while increasing production. In Sarah’s bakery, there would be a decline in marginal productivity in the process of production. Buyers may realize they make large purchases which turn out to be wasted. For this reason, the buyers tend to reduce purchases of Sarah’s bakery products and ensure they work on achieving satisfaction using the available resources.

How can this problem of diminishing returns or marginal productivity be reduced or removed?

For complete removal or reduction of diminishing returns, Sarah’s bakery needs to develop its strategy. For instance, it would be important if the business analyzed an optimum level of production. This production level refers to the output level where marginal revenue of last sold unit of the bakery products equals marginal costs incurred during operation. The optimum production level will ensure that Sarah’s bakery receives maximum profit.

Discussion Post 2

How can the long-run average cost (LRAC) curve be derived from the short-run average total cost (SRATC) curve?

Both the short-run and long-run costs depend on a company’s output level. Other additional facets include costs and quantities. Amacher and Pate (2019) argue that it is necessary to base long-run decisions depending on the short-run average cost curve. Long run decisions are also achieved through grouping all short runs together and analyzing them.

Describe economies of scale and diseconomies of scale.

Economies of scale refer to the state where the average costs of production decrease due to an increase in sales. A company with an increased output level is expected to experience cost advantages level as a result of the scale of operations. Diseconomies of scale occur when an average cost increases due to an increase in sales (Amacher & Pate, 2019). A firm experiencing diseconomies of scale will have an increase in the cost of operations caused by an increase in output.

What are the determinants of economies of scale and diseconomies of scale, respectively?

Economies of scale can be determined in various ways. For instance, an increase in technology and division of labor are some of these determinants. According to Amacher and Pate (2019), large economies of scale allow for more efficient division of labor which is derived from increased technology. However, there also exist determinants of diseconomies of scale, which include lack of motivation, communication interruptions, and poor coordination.

Using a real-world company (other than Sysco), explain the causes of economies of scale for your company.

I like choosing Walmart. For Walmart, the company is capable of selling bulk products at relatively cheaper prices compared to other general stores. Walmart continues to grow steadily with expansions of several small stores in various locations. Furthermore, Walmart also focuses on spreading their fixed costs and boosting their markets through making out advertisements that will create awareness of the company hence promoting sales.

How would economies of scale help your company compete in its industry?

Economies of scale will help Walmart in gaining a competitive advantage. For instance, through technology, Walmart has reduced employees and promoted more self-sufficient check-out lines. Furthermore, Walmart has also added embraced online shopping which they currently offer deliveries through the pick-up points. Furthermore, Walmart has also increased its stocks hence ensuring the availability of diverse products in their stores. Through investing in technology and increasing the size of the company, Walmart is expected to have a greater competitive advantage in the industry.

Reference

Amacher, R., & Pate, J. (2019). Principles of Microeconomics (2nd ed.). 2013 Bridgepoint Education, Inc.