Class Notes - 11-7-07

Class Notes - 11-7-07 - Microeconomics Class Notes 11/7/07...

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Microeconomics – Class Notes – 11/7/07 Short-run: At least one input is fixed (Capital [K]) Long-run: Time period in which all inputs are variable o We can: Exit the industry Firm no longer have any fixed costs or resources in this industry Exiting in the long-run is different from shut-down because shut-down could be short-run Exiting is long-run and occurs after shut-down You can’t exit the industry until all fixed costs are paid Expand our capital IV. Long Run Costs A. Capital Expansion Increase capital (K) which means the firm’s fixed costs increase o At lower levels of output (lower Q), the Average Total Cost (ATC) is higher than before, but we gains in productivity because we have gains in capital. o As the quantity increases, the ATC will be lower because we get higher gains in capital/labor At higher levels of output, the ATC is lower than before because we get increases in productivity from having more capital per unit of labor (more
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This note was uploaded on 04/15/2008 for the course ECON 100 taught by Professor Stephaniemartin during the Fall '07 term at Allegheny.

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Class Notes - 11-7-07 - Microeconomics Class Notes 11/7/07...

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