{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Econ11Fall2007NotesForLecture_15Oct29

# Econ11Fall2007NotesForLecture_15Oct29 - Lecture XV Long Run...

This preview shows pages 1–3. Sign up to view the full content.

Lecture XV Oct 29, 2007, Long Run Cost Curves I. Relation Between Long and Short-Run Cost Curves II. Choosing Output to Maximize Profit in the Long Run III. Supply Response of a Firm in Long-Run Equilibrium I. Relation Between Long and Short-Run Cost Curves A. In the long run, all inputs are fully variable - choose the combination of L & K that minimizes cost. (TFC = 0) \$ TC L TC L =TC S AC L =AC S =MC L =MC S TC S Q ACLmin \$/Q MC S AC S AC L AVC MC L B. Special short run total cost curve drawn for plant size

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
that minimizes long run average cost. 1. When TC S = TC L ; AC S = AC L = MC S = MC L 2. "Bottom of the bird's nest" on the average-marginal diagram where AC S = AC L = MC S = MC L B. "Economies of scale" what happens to output and average cost if all inputs change by the same percentage. 1. Increasing returns to scale - AC falling 2. Constant returns to scale - AC flat 3. Decreasing returns to scale - AC rising II. Choosing Output to Maximize Profit in the Long-Run on a Total Revenue - Total Cost Diagram A. Long run total cost curves - all costs variable
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern