Economics Short Run Vs Long Run Costs Questions Medium
The concept of marginal cost of transportation refers to the additional cost incurred by a firm for transporting one additional unit of goods or passengers. It is calculated by dividing the change in total cost of transportation by the change in the quantity of goods or passengers transported.
In the short-run, the marginal cost of transportation is influenced by factors that can be adjusted in the short term, such as labor, fuel, and maintenance costs. For example, if a firm wants to transport more goods in the short-run, it can hire additional drivers or increase the number of vehicles, which will increase the marginal cost of transportation. Similarly, if the firm wants to transport fewer goods, it can reduce the number of drivers or vehicles, leading to a decrease in the marginal cost of transportation.
In the long-run, the marginal cost of transportation is influenced by factors that can be adjusted over a longer period, such as the size of the fleet, the efficiency of vehicles, and the infrastructure. For instance, if a firm wants to increase its transportation capacity in the long-run, it may need to invest in purchasing new vehicles or expanding its infrastructure, which will increase the marginal cost of transportation. On the other hand, if the firm wants to reduce its transportation capacity, it may sell some of its vehicles or downsize its infrastructure, resulting in a decrease in the marginal cost of transportation.
Overall, the relationship between the marginal cost of transportation and short-run and long-run costs is that in the short-run, the marginal cost is influenced by factors that can be adjusted in the short term, while in the long-run, the marginal cost is influenced by factors that can be adjusted over a longer period. The ability to adjust these factors in the short-run and long-run impacts the firm's cost structure and its ability to efficiently transport goods or passengers.