When dealing with multinational operations organizations mus

When dealing with multinational operations, organizations must be conscious of both short- and long-term production costs. In this particular case, Apple is considering both of these issues, and the company is also required to look at the production function to determine whether it is feasible to continue operations in foreign countries or it should enhance its manufacturing base in the United States.

Instructions

Analyze how examples in this particular case impact the short- and long-run decision on plant location. Explain how this is affected by the short- and long-run production function.
In terms of the production process, how can diminishing returns affect Apple in this situation?In terms of the production process, how can diminishing returns affect Apple in this situation?

Solution

In the short run, most of the factor inputs used in production are restricted in supply, and their price cannot be changed. So these inputs are considered fixed in the short run.

But in long run, almost all factors of production are considered flexible in that the firm can change their usage in terms of quantity used, and since in long run more substitutes are available, such factor prices are also lower. Therefore, short run total costs are higher than long run total costs of production.

Accordingly, the short run production function is almost fixed (only labor is considered the variable input). The long run production function is more flexible. Since this short run inflexibility makes a firm use more and more of a particular input in the short run, as more amount of input gets used, the marginal return keeps decaeasing. So, diminishing returns set in.

These are the basic concepts to be used in the case. Unfortunately you\'ve not provided the relevant part of your Apple case study, so specific questions cannot be answered.