Analysis of Short-Run and Long-Run Production Costs in Microeconomic Theory
Keywords:
Average Cost, Economies of Scale, Long-Run Costs, Marginal Cost, Short-Run Costs.Abstract
Production costs influence output selection, temporary shutdown decisions, and capacity planning under different input constraints. This article examined short-run and long-run production cost structures, compared their underlying mechanisms, and considered implications for firm decisions. A narrative literature review synthesized microeconomic theory and relevant journal studies through conceptual classification, comparison, and mathematical illustrations. Short-run costs were examined using a hypothetical total cost function distinguishing fixed and variable expenditures, average costs, and marginal costs. The analysis showed that diminishing marginal returns can increase marginal cost, while spreading fixed expenditure across output initially reduces average total cost. The illustrative function yielded minimum average total cost of 30 at 10 output units. Long-run analysis emphasized flexible inputs, cost-minimizing capacity choices, and the envelope relationship between long-run and short-run average cost curves. A second hypothetical function reached minimum long-run average cost of 24 at six output units, illustrating economies and diseconomies of scale. Short-run operating decisions were interpreted using marginal revenue and marginal cost, together with the avoidable-cost shutdown criterion. These results distinguish theoretical cost relationships from firm-level measurements and do not constitute observed industrial efficiency outcomes. Their practical application requires empirical cost and production data, especially when technology, market conditions, and adjustment constraints differ.
Downloads
References
Abraham, F., Bormans, Y., Konings, J., & Roeger, W. (2024). Price-cost margins, fixed costs and excess profits. The Economic Journal, 134(663), 2655–2684. https://doi.org/10.1093/ej/ueae037
Aji, J. M. M., Rondhi, M., Suwandari, A., Hapsari, T. D., Januar, J., Yanuarti, R., & Rokhani. (2023). Determinants of cost inefficiency and farmer performance in broiler contract farming. Tropical Animal Science Journal, 46(3), 382–388. https://doi.org/10.5398/tasj.2023.46.3.382
Ayuningtyas, R. R., Ekowati, T., & Prastiwi, W. D. (2022). Added value of soybean into tempeh chips in Kedungjenar home industry centre, Blora Regency. Jurnal Manajemen dan Agribisnis, 19(3), 481. https://doi.org/10.17358/jma.19.3.481
Bennur, S., & Malhotra, D. K. (2023). Scaling up beauty: An analysis of economies of scale in the cosmetics industry. Journal of Applied Business and Economics, 25(2), 243–251. https://doi.org/10.33423/jabe.v25i2.6110
Betancourt-Gómez, M. E. (2026). The impact of market concentration and economies of scale on production networks: A new nonlinear input–output framework. Economic Systems Research, 38(2), 218–234. https://doi.org/10.1080/09535314.2025.2581177
Cesaroni, G., Kerstens, K., Sadeghi, J., & Van de Woestyne, I. (2026). The shape of ray average cost and its role in multioutput scale economies: Some generalizations. Applied Economics, 58(39), 8179–8194. https://doi.org/10.1080/00036846.2025.2536874
Chen, C. X., Liang, J., Yang, S., & Zhu, J. (2024). The bullwhip effect, demand uncertainty, and cost structure. Contemporary Accounting Research, 41(1), 195–225. https://doi.org/10.1111/1911-3846.12908
Diewert, W. E., Nomura, K., & Shimizu, C. (2025). Estimating flexible functional forms using macroeconomic data. Empirical Economics, 69, 2671–2697. https://doi.org/10.1007/s00181-025-02727-y
Hernawati, H., Syaukat, Y., Firdaus, M., & Suwarsinah, H. K. (2023). The impact of irrigation on the allocative and economic efficiencies on rice farming: A case study in West Nusa Tenggara Province. Jurnal Manajemen dan Agribisnis, 20(3), 491. https://doi.org/10.17358/jma.20.3.491
Irawan, F. W., Setiadi, A., & Auralia, M. (2026). Technical and economic efficiency analysis of cayenne pepper farming in Magelang Regency, Central Java. Jurnal Manajemen dan Agribisnis, 23(2), 166–178. https://doi.org/10.17358/jma.23.2.166
Lee, S., & Kang, N. (2026). Modular mechanism design optimization in large-scale systems with manufacturing cost considerations. International Journal of Precision Engineering and Manufacturing-Green Technology, 13(2), 565–589. https://doi.org/10.1007/s40684-025-00770-9
Maharani, I., Kusnadi, N., & Fariyanti, A. (2024). The impact of credit constraint on productivity and technical efficiency of sugarcane in Indonesia. Jurnal Manajemen dan Agribisnis, 21(1), 35. https://doi.org/10.17358/jma.21.1.35
Malikov, E., Zhao, S., Kumbhakar, S. C., & Bernstein, D. H. (2025). Estimating production functions using costs when outputs are restricted. Econometric Reviews, 44(4), 433–461. https://doi.org/10.1080/07474938.2024.2419389
Mankiw, N. G. (2018). Principles of Microeconomics (8th ed.). Cengage Learning.
Mas-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomic Theory. Oxford University Press.
Mohammad Nor, N. A. A., Buda, M., Mohd Nor, N., Wong, K. S. K., Sharifuddin, J., & Suhaimee, S. (2024). Cost efficiency analysis of broiler production in Peninsular Malaysia. Tropical Animal Science Journal, 47(3), 402–408. https://doi.org/10.5398/tasj.2024.47.3.402
Motoyama, Y. (2025). A dynamic optimization model considering cost and speed in the Cobb-Douglas production function. Decision Analytics Journal, 14, Article 100535. https://doi.org/10.1016/j.dajour.2024.100535
Mufahamah, E., Fitriani, W., & Pramesti, P. R. (2026). Pengambilan Keputusan Biaya: Dasar Membangun Perusahaan yang Menguntungkan. Detak Pustaka.
Nabilla, Z. S., & Nursanti, Y. B. N. B. (2024). Penerapan limit fungsi mencari keuntungan maksimum dari biaya marginal. Eqien-Jurnal Ekonomi dan Bisnis, 13(02), 168-176. https://doi.org/10.34308/eqien.v13i02.1624
Nazri, F. A., Tinaprilla, N., Fariyanti, A., & Baga, L. M. (2026). Technical efficiency and profitability of smallholder dairy cattle farming post-FMD: A stochastic frontier analysis in West Java. Jurnal Manajemen dan Agribisnis, 23(1), 17–31. https://doi.org/10.17358/jma.23.1.17
Nessa, M. L., & Supriyanto. (2026). Teori biaya dalam pengambilan keputusan manajerial: Kajian systematic literature review. Jurnal Pendidikan Sosial dan Humaniora, 5(2), 2444–2458. https://publisherqu.com/index.php/pediaqu/article/view/4221
Nicholson, W., & Snyder, C. (2017). Microeconomic Theory: Basic Principles and Extensions (12th ed.). Cengage Learning.
Palatnik, R. R., Freer, M., Levin, M., Golberg, A., & Zilberman, D. (2023). Algae-based two-stage supply chain with co-products. Ecological Economics, 207, Article 107781. https://doi.org/10.1016/j.ecolecon.2023.107781
Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics (9th ed.). Pearson.
Rosidah, A., Irham, Masyhuri, & Perwitasari, H. (2023). Sugarcane production efficiency: A case study on PTPN X partner farmers. Jurnal Manajemen dan Agribisnis, 20(1), 56. https://doi.org/10.17358/jma.20.1.56
Saragih, R., Teguh, M., & Harunurrasyid. (2018). Pengaruh biaya produksi terhadap keuntungan industri roti dan kue di Kota Palembang. Jurnal Ekonomi Pembangunan, 16(1), 27–33. https://doi.org/10.29259/jep.v16i1.8875
Simanjuntak, N., Ginting, I. D. B., Padang, P., Sihombing, A. A., & Siringoringo, E. (2025). Teori biaya (short run long-run). Jurnal Manuhara: Pusat Penelitian Ilmu Manajemen dan Bisnis, 3(3), 41–51. https://doi.org/10.61132/manuhara.v3i3.1848
Sukirno, S. (2016). Pengantar Teori Mikroekonomi [Introduction to microeconomic theory] (3rd ed.). RajaGrafindo Persada.
Tinaprilla, N., Muflikh, Y. N., Yanuar, R., & Permata, K. I. (2024). The roles of smart fertigation in chili farming. Jurnal Manajemen dan Agribisnis, 21(1), 95. https://doi.org/10.17358/jma.21.1.95
Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach (9th ed.). W. W. Norton & Company.
Wang, S., Cao, B., Bai, R., & Liu, G. (2025). Determination of production capacity for open-pit coal mines under uncertainty: A model based on economies of scale. PLOS ONE, 20(1), Article e0312130. https://doi.org/10.1371/journal.pone.0312130
Wijaya, A., Rifin, A., & Hartoyo, S. (2022). Determining technical and resource-use efficiency in rice production in East Java. Jurnal Manajemen dan Agribisnis, 19(1), 48. https://doi.org/10.17358/jma.19.1.48
Zhang, N., Zhang, Q., & Geng, X. (2025). Revisiting economies of scale: The moderating role of efficiency in corn farming. Frontiers in Sustainable Food Systems, 9, Article 1621038. https://doi.org/10.3389/fsufs.2025.1621038
