Assignment on
Ring Shine Textiles Company Limited Different Short Run and Long Run
Inputs and Costs
Course Name: Principles of Economics
Course Code: EIB – 509
Submitted to:
Mansura Akter
Associate Professor
Department of International Business
University of Dhaka, Dhaka-1000, Bangladesh
Submitted by:
Mithan Bhowmick
ID: 802031031
Date of Submission: 27th April, 2021
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Table of Contents
Company Overview: ..................................................................................................................................... 3
Short Run Inputs: .......................................................................................................................................... 4
Long Run Inputs: .......................................................................................................................................... 5
Short Run Costs: ........................................................................................................................................... 6
Short Run Costs Curve.................................................................................................................................. 7
Long Run Costs: ........................................................................................................................................... 8
Production Function:..................................................................................................................................... 9
Long-Run Average Cost Curve: .................................................................... Error! Bookmark not defined.
References:.................................................................................................................................................. 10
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Company Overview:
Ring Shine Textiles Company founded in 1998, Ring Shine started its journey by setting up yarn
spinning and dyeing facilities. The company has subsequently expanded into production of knit
fabrics, priding itself to be a fully integrated manufacturer that comply with international
standards.
Having over 20 years of delivering quality products, exporting to many countries in Europe,
USA and Japan, Ring Shine has established itself as a trusted partner with many global clients.
With an annual sale of over USD110 million, it is well positioned for further growth under the
leadership of its dynamic management.
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Short Run Inputs:
Short run input is a time frame in which one or more resources used in
production is fixed. For most of firms, capital is fixed in the short run. Other resources used by the
firm (such as labor, raw materials, and energy are variable in the short run. Short-run decisions are
easily reversed. Sometimes one company fixed input is the size of its factory and machines.
Variable input is the size of its labour force.
Here we see that some kinds of current assets which are the short-term assets that are typically
used up in less than one year. Short-run input is used in the day-to-day operations of a business to
keep it running. Short-run input is used to meet the short-term operational requirements of the
business as these assets are readily converted into cash. Some advantages of short-term input are
the most liquid input of the company so they are the most essential part of the business because
they are available to meet short term requirements. The cost of funding on the short run input of
the company is low as compared to the long-run input and the loans to purchase short-run input
are faster to obtain.
If any producer wants to increase their production they can increase raw material or labor but one
of their input is fixed like equipment, plant, land or factory building.
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Long Run Inputs: Long run has a time surround in which the amounts of all resources can be
diverse. No fixed inputs in the long run. Organization can alter its workforce to meet any variety
of business demands, and company can also build new factories and purchase new machinery.
Organization can build factories and enter the market in the long run.
Here are some kinds of input of production. All of the inputs are important in production. If any
company try to increase his production they can increase the factors of production like raw
material, land, machineries etc. None of the factors can be fixed all of the factors have been
variable. In short run which doesn’t match.
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Short Run Costs: Short run costs are accrued in real time through the production process. Fixed
costs have no effect of short run costs, only variable costs and revenues affect the short run
production. Variable costs transformation with the output. Some types of variable costs include
employee wages and costs of raw materials. The short run costs increase or decrease based on
variable cost as well as the rate of production. If a firm manages its short run costs well over time,
it will be more possible to succeed in reaching the desired long run costs and goals. Short run cost
is sum of the total fixed cost & total variable cost. Total fixed cost (TFC) is the cost of all the
firm’s fixed inputs. Total variable cost (TVC) is the cost of all the firm’s variable inputs. Total
cost (TC) is the cost of all productive resources used by a firm.
In this table we see that the characteristics of all the cost curves. Column five shows that average
fixed cost decreases over the entire range of output. Columns six and seven show that both average
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variable and average total cost first decrease, then increase, with average variable cost attaining a
minimum at a lower output than that at which average total cost reaches its minimum. Column
eight shows that marginal cost per 100 units is the incremental increase in total cost and variable
cost. If we compare columns six and eight we see that marginal cost per unit is below average
variable and average total cost when each is falling and is greater than each when Average Variable
Cost and Average Total Cos are rising.
Short Run Costs Curve
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Long Run Costs: Long run costs are accumulated when firms change production levels over
time in response to expected economic profits or losses. In the long run there are no fixed factors
of production. The land, labor, capital goods, and entrepreneurship all vary to reach the long run
cost of producing a good or service. The long run is a planning and implementation stage for
producers. They analyze the current and projected state of the market in order to make production
decisions. Efficient long run costs are sustained when the combination of outputs that a firm
produces results in the desired quantity of the goods at the lowest possible cost. Examples of long
run decisions that impact a firm's costs include changing the quantity of production, decreasing or
expanding a company, and entering or leaving a market.
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Production Function:
The relationship between the maximum output attainable and the quantities of both labor and
capital. Example:
Output (Sweaters per day)
Labor
Plant 1
Plant 2
Plant 3
Plant 4
1
4
10
13
15
2
10
15
18
21
3
13
18
22
24
4
15
20
28
26
5
16
21
25
27
2
3
4
Knitting Machine 1
Number
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References:
•
http://ringshine.com/wp-content/uploads/2019/12/Annual-Report-2019.pdf
•
https://opentextbc.ca/principlesofeconomics/chapter/7-3-the-structure-of-costs-in-thelong-run/
•
https://www.economicsdiscussion.net/theory-of-cost/cost-in-short-run-and-long-runwith-diagram/19965
•
https://www.youtube.com/watch?v=QuQI7Xwa9RU
•
https://www.ringshine.com/
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