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Unformatted text preview: Long Run a time period in which all costs vary, there are no fixed cost. Average Cost (AC) - equal to total cost divided by the number of goods produced. Marginal Cost (MC) extra cost of making one more unit of output (derive this by subtracting the two total costs difference for an additional quantity of good). Tells us about the profit maximizing output. Also tell us about the efficiency of the price quantity combination Average Variable Cost (AV) tell us about a firms shut down point. It tells us when its rational for a firm to simply shut down. When is it optimal to shut the thing down? If Marginal cost > Average Cost, average will rise If Marginal cost = Average Cost, average will be unchanged If Marginal Cost < Average Cost, Average will fall...
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