Short Run Production Function vs. Long Run Production Function: Know the Difference
By Shumaila Saeed || Published on January 19, 2024
"The Short Run Production Function involves at least one fixed input, limiting immediate output changes, whereas the Long Run Production Function allows all inputs to be variable, facilitating full adjustment in output."
Key Differences
The Short Run Production Function is defined by the presence of fixed and variable inputs, leading to immediate limits on output adjustments. In contrast, the Long Run Production Function allows all inputs to be variable, offering greater flexibility in changing output levels.
Shumaila Saeed
Jan 19, 2024
In the Short Run Production Function, the inability to alter all inputs quickly often leads to inefficient resource utilization. On the other hand, the Long Run Production Function enables complete resource reallocation, optimizing production efficiency over time.
Shumaila Saeed
Jan 19, 2024
The Short Run Production Function often deals with short-term cost constraints, where certain factors like plant size remain constant. Conversely, the Long Run Production Function involves strategic planning, allowing for adjustments in all production factors, including plant size.
Shumaila Saeed
Jan 19, 2024
Decision-making in the Short Run Production Function is typically reactive, addressing immediate market demands with limited flexibility. In contrast, the Long Run Production Function supports proactive strategies, enabling businesses to plan for future market conditions and technological advancements.
Shumaila Saeed
Jan 19, 2024
The Short Run Production Function is crucial for day-to-day operations, managing immediate production with existing resources. The Long Run Production Function, however, is vital for long-term business growth and sustainability, allowing for comprehensive planning and resource allocation.
Shumaila Saeed
Jan 19, 2024
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Comparison Chart
Cost Constraints
Immediate, often inefficient
Strategic, optimizing efficiency
Shumaila Saeed
Jan 19, 2024
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Short Run Production Function and Long Run Production Function Definitions
Short Run Production Function
Immediate output adjustment based on variable and fixed inputs.
A restaurant's Short Run Production Function is impacted when adding more chefs but with the same kitchen size.
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Jan 05, 2024
Long Run Production Function
Strategic production capacity with complete input adjustability.
A hospital's Long Run Production Function is seen in its plan to add more specialized departments.
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Jan 05, 2024
Short Run Production Function
A production process where at least one input is fixed.
In a bakery, the Short Run Production Function is evident when the number of ovens (fixed input) limits daily bread production.
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Jan 05, 2024
Long Run Production Function
Planning for operational efficiency without current limitations.
The Long Run Production Function of a renewable energy firm involves investing in new technology for increased power generation.
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Jan 05, 2024
Short Run Production Function
Short-term production capacity with existing resources.
The Short Run Production Function for a call center is determined by the current number of workstations.
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Jan 05, 2024
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Long Run Production Function
A production process where all inputs can be varied.
The Long Run Production Function for an auto manufacturer includes plans to expand factory space.
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Jan 05, 2024
Short Run Production Function
Production where quick changes are constrained by unchangeable factors.
A software company's Short Run Production Function is limited by its current server capacity.
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Jan 05, 2024
Long Run Production Function
Long-term production planning with flexible resources.
A university's Long Run Production Function involves gradually increasing its campus buildings.
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Jan 05, 2024
Short Run Production Function
Operational efficiency within a limited timeframe.
The Short Run Production Function of a retail store during the holiday season depends on its current staffing levels.
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Jan 05, 2024
Long Run Production Function
Full output adjustment without immediate input constraints.
The Long Run Production Function of a tech company includes transitioning to entirely cloud-based services.
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Jan 05, 2024
Repeatedly Asked Queries
Can a firm change its production facility size in the short run?
No, changes in facility size are considered long run adjustments.
Shumaila Saeed
Jan 19, 2024
How is labor typically treated in the short run?
Labor is often the variable input in the short run production function.
Shumaila Saeed
Jan 19, 2024
What happens to average total cost in the short run?
It typically decreases and then increases due to the Law of Diminishing Returns.
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Jan 19, 2024
What is the Law of Diminishing Returns?
It states that as additional units of a variable input are added to a fixed input, the marginal product eventually decreases.
Shumaila Saeed
Jan 19, 2024
What is the Short Run Production Function?
It describes the relationship between inputs and outputs in a production process when one or more inputs are fixed.
Shumaila Saeed
Jan 19, 2024
Can all factors of production be varied in the short run?
No, at least one factor (usually capital) is fixed in the short run.
Shumaila Saeed
Jan 19, 2024
What is a production isoquant?
It's a curve representing all combinations of inputs that yield the same level of output.
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Jan 19, 2024
What is the concept of returns to scale?
It refers to how output changes as all inputs change proportionally in the long run.
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Jan 19, 2024
How does the Long Run Production Function differ from the Short Run?
It allows for adjustment in all inputs and scale of operations, unlike the short run.
Shumaila Saeed
Jan 19, 2024
Is technology change considered in the short run?
Generally, technology is assumed constant in the short run.
Shumaila Saeed
Jan 19, 2024
Can a firm enter or exit the market in the short run?
No, market entry and exit are long run decisions.
Shumaila Saeed
Jan 19, 2024
What defines the Long Run Production Function?
It’s the period where all inputs, including capital, labor, and technology, can be varied.
Shumaila Saeed
Jan 19, 2024
Is short run production analysis relevant for decision-making?
Yes, it helps firms optimize production and costs with existing resources.
Shumaila Saeed
Jan 19, 2024
Are there fixed factors of production in the long run?
No, all factors are variable in the long run.
Shumaila Saeed
Jan 19, 2024
How does the long run impact market structure?
It allows for new firms to enter and inefficient firms to exit, affecting competition and market dynamics.
Shumaila Saeed
Jan 19, 2024
Can a firm achieve optimal scale in the long run?
Yes, firms can adjust all factors to achieve the most efficient scale of production.
Shumaila Saeed
Jan 19, 2024
Can a firm change its technology in the long run?
Yes, technological changes are a key aspect of long run adjustments.
Shumaila Saeed
Jan 19, 2024
What is a Long Run Average Cost Curve?
It shows the lowest possible cost at which any given output can be produced in the long run.
Shumaila Saeed
Jan 19, 2024
Is there diminishing returns in the long run?
No, the concept of diminishing returns applies only to the short run.
Shumaila Saeed
Jan 19, 2024
Why is the Long Run Production Function important for strategic planning?
It helps in making decisions about investments, expansion, and technological advancements for optimal long-term growth.
Shumaila Saeed
Jan 19, 2024
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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