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What is Theory of Firm: Short and Long Run Analysis about?

The document discusses the theory of the firm in both the short run and long run. In the short run, firms have fixed costs and variable costs. As output increases, average costs initially fall due to economies of scale but eventually rise again due to diminishing returns. In the long run, all factors of production are variable and firms experience economies of scale at first as average costs fall with increasing size, but eventually diseconomies of scale set in as very large firms become less efficient.

Author

Utkarsha

Language

EN