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Find an article in which a firm is facing a change in their input costs. Note that the changing costs don't have to be discussed
Find an article in which a firm is facing a change in their input costs. Note that the changing costs don't have to be discussed explicitly in the article. An acceptable article could begin its discussion with something like "because of increasing costs..." Now respond to the following prompts:
- Describe the costs that are changing. Are they fixed or variable costs for the firm's production in the short-run decision regarding quantity of production (and what timeframe would they be fixed if they are fixed)?
- How would those changing costs affect the marginal costs of the firm, and how would you expect a firm to respond to the change in input prices? In other words, what decisions would the firm change?
- Consider both the quantity of production and if the firm can or would substitute inputs. If the firm were a perfectly competitive market, how would the changing costs affect the price and number of transactions in the short run?
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