Econ11Fall2006NotesForLecture_15Oct30

Econ11Fall2006NotesForLecture_15Oct30 - Lecture XV Oct 30,...

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

View Full Document Right Arrow Icon
Lecture XV Oct 30, 2006, 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 TC S Q ACLmin $/Q MC S AC S AC L AVC MC L
Background image of page 1

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

View Full DocumentRight Arrow Icon
B. Special short run total cost curve drawn for plant size 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
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/20/2010 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

Page1 / 4

Econ11Fall2006NotesForLecture_15Oct30 - Lecture XV Oct 30,...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online