Question

The owners of Fred's Dishrags, incorporated, want to examine and update the productive resources of their company, with the aim of increasing or decreasing the quantity of each resource to its most efficient level. What two types of analysis should they do, what does each type consist of, and which specific items on the list would apply to each?

a) Short-run analysis and long-run analysis
b) Quick analysis and prolonged analysis
c) Immediate assessment and extended assessment
d) Swift review and extensive review

Answer 1

Fred's Dishrags, Incorporated should conduct short-run and long-run analyses to optimize their production resources. Short-run analysis focuses on variable inputs with fixed inputs unchanged, while long-run analysis involves adjusting all production factors, including those fixed in the short term.

Step-by-step explanation:

The owners of Fred's Dishrags, Incorporated should engage in both short-run analysis and long-run analysis to update the productive resources of their company efficiently. Short-run analysis involves understanding and optimizing the production process within the constraints of fixed inputs that cannot be changed quickly, such as the building size in the example of a pizza restaurant lease. Conversely, long-run analysis allows the company to evaluate and adjust all factors of production, including those considered fixed in the short-run, allowing for significant changes such as relocation, expansion, or downsizing.

In the context of Fred's Dishrags, short-run analysis might include assessing the efficiency of variable inputs like labor and raw materials, while long-run analysis could involve decisions about capital investments, plant size, and technology. These analyses are vital for businesses that aim to streamline operations and maximize profitability by adapting their resource allocation strategies according to operational timelines.