ANSWERS TO TRY IT! PROBLEMS To produce jackets, Acme uses units of labor In the long run, Acme will substitute capital for labor It cannot make this adjustment in the short run, because its capital is fixed in the short run [1] Lucinda Vargas, “Maquiladoras: Impact on Texas Border Cities,” in The Border Economy, Federal Reserve Bank of Dallas (June 2001): 25–29; William C Gruben, “Have Mexico’s Maquiladoras Bottomed Out?”, Southwest Economy, Federal Reserve Bank of Dallas (January/February, 2004), pp 14–15 8.3 Review and Practice Summary In this chapter we have concentrated on the production and cost relationships facing firms in the short run and in the long run In the short run, a firm has at least one factor of production that it cannot vary This fixed factor limits the firm’s range of factor choices As a firm uses more and more of a variable factor (with fixed quantities of other factors of production), it is likely to experience at first increasing, then diminishing, then negative marginal returns Thus, the short-run total cost curve has a positive value at a zero level of output (the firm’s total fixed cost), then slopes upward at a decreasing rate (the range of increasing marginal returns), and then slopes upward at an increasing rate (the range of diminishing marginal returns) Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 454