BB Question #2

You need to come up with a comment and question on the following post:”Trek is a well-known bicycle manufacturing company. Emonda ALR is light and responsive road bike with advance alloy frame which gives the bike a sleek look and handling of a far more expensive carbon bike. Factors of production are the inputs needed to create a good or services. It divides into four categories Land, Labor capital and entrepreneurship.  Trek is a proud Wisconsin based bicycle company known for their carbon frame bicycle, they make approximately 56,000 bikes domestically. The bikes are built with sheet of flat carbon fabric completely by hand. There are no third-party manufacturer involves. The engineers come out with designs to produce lighter bike for the company.

Cost minimization is a basic foundation used by manufacturers to determine mix of labor and capital produces output at the lowest cost. In long run manufacture has flexibility over all aspects of production. How many employees to hire, how big the warehouse needs to be, what technology to use.  On the other hand, side short run cost function finds relationship between firms output cost and output based on the short run production. For Trek to come out with new innovative bicycles they will use long run cost basic reason being they have to hire engineers who can create new design then hire workers to build that product. However, to make the same model Emonda they will use short run cost method, since all the mold for the parts are already made all they have to do is follow the production plan to make more products. Economic of scopes states the average total cost of a company production decreases when there is an increasing variety of good produced. Where economy of scale is the cost advantage a company has with the increased output of goods or services.”