The role of management is to determine the optimal combinations of decision variables to achieve the firm’s objective(s). A temporal distinction can be made between utilising the firm’s existing resources in an optimal manner and determining the optimal level of such resources. So far we have concentrated on the first set of decisions, although we have in several chapters referred to factors which span a longer time period (e.g. in relation to cost and demand estimation). It is to an explicit examination of the second set of decisions — the choice of an optimal level of resources at the firm’s disposal — that we now turn.
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