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Unformatted text preview: (a) increasing returns to scale implies decreasing AC (b) constant returns implies constant AC (c) decreasing returns implies increasing AC 3. Long-run and short-run costs (a) long run: all inputs variable c s ( y, x 2 ) = w 1 x s 1 ( w 1 ,w 2 , x 2 ,y ) + w 2 x 2 (b) short run: some inputs Fxed c ( y ) = w 1 x 1 ( w 1 ,w 2 ,y ) + w 2 x 2 ( w 1 ,w 2 ,y ) 4. ixed and quasi-Fxed costs (a) Fxed: must be paid, whatever the output level there are no Fxed costs in the long-run ! (b) quasi-Fxed: only paid when output is positive (heating, lighting, etc.) (c) sunk costs : costs that cannot be recovered 1...
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- Summer '10