Distinguish between the short run and the long run. What will differentiate the short run and the long run? The short run is a period where some things in a business are fixed and cannot be easily changed, like the equipment or a physical space. In the short run, the business can only adjust certain things, such as the number of employees or materials, to increase or decrease production.

Describe fixed inputs and variable inputs. Which inputs are fixed, and which are variable in Sarah's bakery? The long run is a period where everything in a business can be adjusted or can be changed. This means the business can modify both the fixed things (like equipment) and the variable things (like employees) to adapt to different circumstances or demands. In the example for Sarah's bakery, the fixed inputs are things like the ovens and the full-time administrative employee. These things can't be easily changed in the short run. The variable input is the part-time bakers, which Sarah can adjust based on how much she needs to produce.

Why would marginal productivity decline after a certain level of production? Marginal productivity refers to how much more of an output a business can produce by adding one more employee, while being able to keep everything else the same. After a certain point, adding more employees may not even lead to the same level of increased output. This happens because the bakery might become crowded, and less organized, which in hand can cause the decreases in efficiency and productivity.

How can this problem of diminishing returns or marginal productivity be reduced or removed? Improve technology or equipment by investing in better tools or technology which can make the bakery more efficient and able to produce more output with the same resources. Organizing the bakery's work and tasks in a way that lets each worker focus on specific job duties can increase productivity. By assigning roles based on the employee's skillsets, the bakery can work more smoothly. Providing training opportunities to the bakers to train so that they can develop their skills and improve their abilities will make them more productive. Finding what works and what doesn't by experimenting with different combinations of ovens, mixers and engaging employees with incentives to help find the most effective way to use resources and maximize output.

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