3-10-08 - Perfect Substitutes: Perfect Complements: The...

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Perfect Substitutes: Perfect Complements:
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The Shape of the Long-Run Average Cost Curve Fixed cost and an increase, then diminishing average product of labor determined the U shaped short-run average cost curve. Economies and Diseconomies of Scale Economies of Scale – characteristics of a firms technology that lead to falling lon-run average cost - Increased specialization of capital and labor as more output is produced. - Changes in the type of capital used at higher levels of output. - Increasing returns to scale. Diseconomies of Scale – characteristics of a firm’s technology that lead to increasing long-run average cost. - Difficulty in managing a large enterprise. - Decreasing returns of scale. Minimum Efficient Scale – The level(s) of output at which long-run average cost are at their lowest.
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The Relationship Between Long and Short-run Average Cost Curves The long-run average cost curve is the envelope of the short-run average cost curves. What the hell does this mean?
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This note was uploaded on 04/18/2008 for the course ECON 101 taught by Professor Hansen during the Spring '07 term at Wisconsin.

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3-10-08 - Perfect Substitutes: Perfect Complements: The...

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