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T H E R E L AT I O N S H I P B E T W E E N S H O R T - R U N A N D
L O N G - R U N AV E R A G E T O TA L C O S T
For many firms, the division of total costs between fixed and variable costs de-
pends on the time horizon. Consider, for instance, a car manufacturer, such as Ford
Motor Company. Over a period of only a few months,herve leger bandage dress, Ford cannot adjust the num-
ber or sizes of its car factories. The only way it can produce additional cars is to
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therefore, a fixed cost in the short run. By contrast, over a period of several years,true religion jeans wiki,
Ford can expand the size of its factories,chi flat iron repair, build new factories, or close old ones.
Thus,beats by dre custom, the cost of its factories is a variable cost in the long run.
Because many decisions are fixed in the short run but variable in the long run,
a firm's long-run cost curves differ from its short-run cost curves. Figure 13-7
shows an example. The figure presents three short-run average-total-cost curves--