Economists Describe Short-Run Decisions as "Constrained" Decisions,while Long-Run Decisions Are

question 67

Essay

Economists describe short-run decisions as "constrained" decisions,while long-run decisions are described as "planning" decisions.Referring to a firm's short-run average cost function and long-run average cost function,explain this distinction.

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Definitions:

Working Capital

Working Capital is the difference between a company's current assets and current liabilities, indicating short-term financial health.

Discount Rate

This refers to the rate used in discounted cash flow assessments to figure out the current value of cash flows expected in the future.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of investments.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity and operational efficiency.