1) A plywood firm uses three inputs – labor, lumber, and saws. Although it van vary its labor each week, it must order its lumber six months in advance, and it would take a year for the firm to sell its saws or acquire new saws. What time periods comprise the short run and the long run for this particular firm?

2) Explain why, aside from the shut-down decision (i.e., assuming that the firm plans to produce some positive amount), a firm should not use its average cost of production to determine the quantity of output that it produces.