Stan owns a software design business.He does not have time to expand his office space or redesign the layout of his office.He can increase the amount of work he does by working more hours, asking his current employees to work more hours, or hiring more employees.The relationship between Stan's inputs and the maximum output his firm can produce is called his
A)long-run production function.
B)production possibilities frontier.
C)short-run production function.
D)cost function.

Question

Quizplus · Accepted Answer

Since Stan cannot expand his office space or redesign the layout of his office, he is limited by the short-run. Therefore, he should focus on maximizing his output in the short-run. The relationship between Stan's inputs and the maximum output his firm can produce in the short-run is called his short-run production function. Working more hours or asking his current employees to work more hours are short-term solutions that can increase output in the short-run. Hiring more employees can also increase output but may not be feasible in the short-run due to time and training constraints. Therefore, the best choice is to focus on the short-run production function and increase output by either working more hours or asking current employees to work more hours.

Stan Owns a Software Design Business