Chapter 8 Long Runs - Producer Decisions Administrative...

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1 Microeconomics Principles March 24, 2008 Long Run Production Costs Producer Decisions Administrative Reminder: z Homework #4 Due Wednesday z Focus: Chapter 8 (includes material we worked on during the in-class) Come to the Econ lab for any help! z Stevens Hall room 305 z Note: Change in office hours today [11-1] Today’s Outline Chap 8 pgs. 155-160 z Long Run Production Costs z Economies of Scale z Average Total Cost Curves in the Long Run Wednesday: z Start Chap 9 Costs 123456789 10 0 Q 50 100 150 $200 1: AFC 3: ATC 2: AVC 4: Marginal Cost Short Run Costs Why do they have these shapes? MC, AVC and ATC LONG RUN Production Costs Previously seen ONLY Short Run Remember our assumptions Short Run z What can we vary? z Can a firm exit the market? z What explains the shape of all our curves? Short Run z Can only vary labor, other non-plant assets z Firms cannot exit the market z Diminishing Marginal Returns z Looking at cost per unit (avg and marginal)
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2 Remember our assumptions… Long Run z What can we vary? z Can a firm exit the market? z What explains the shape of all our curves?
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Chapter 8 Long Runs - Producer Decisions Administrative...

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