Supply Side-LongRun

Supply Side-LongRun - 1"#$&#$"&,$...

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Unformatted text preview: 1 !"#$%#&'%#$()*"+,%!&,$-,+.#'*+!/ 0123456175$89$#:8786;:< =>?>[email protected];14 Supply Side-Long Run I. Long-Run Costs A. Long-Run Rules Handout 7: Long-Run Costs +7$ 5B1$ [email protected]$ 3AA$ :8<5<$ 341$ F34;3GA1>$ $ !B@<E$ 3AA$ :8<5<$ 341$ F34;3GA1$ :8<5<>$ $ [email protected] [email protected]$:8<5<$341$5B1$:B1321<5$I3J$58$248K@:[email protected]@5$C;F17$5B35$3AA$;[email protected]< 341$F34;3GA1>$$$L87<[email protected]$3AA$871$711K<$58$K8$;[email protected]$;<[email protected]<$;7$5B1 241:1K;7C$<1:5;87$I;5B$41<21:5$58$3AA$;[email protected]<>$$!B35$;<E$:B88<1$3AA$;[email protected]<$<8$5B35$5B1$634C;73A :8<5$89$248K@:;7C$37$3KK;5;[email protected];5$89$5B1$C88K$;<$5B1$<361$984$3AA$;[email protected]<$84E$3A514735;F1AJE 5B1$634C;73A$248K@:5<$214$K8AA34$341$5B1$<361$984$3AA$;[email protected]<> B. Relation of Long-Run Cost Curves to Short-Run Cost Curves *;7:1$ 3AA$ :8<5<$ 341$ F34;3GA1E$ +7$ 5B1 [email protected]$5B1$9;46$;<$9411$58$F34J$3AA$;[email protected]<$<8 3<$ 58$ 248K@:1$ [email protected]@5$ 35$ A8I14$ :8<5>$ $ N84 1O362A1E$ ;5$ ;<$ 9411$ 58$ G@;AK$ 3$ G;CC14$ 84 <63AA14$ 93:584J$ ;9$ 5B35$ [email protected]$ G1$ 5B1 :B1321<5$I3J$58$248K@:[email protected]@5> [email protected]<1$5B35$5B1$9;46$:[email protected]$G@;AK$Q$<;R1<$89$2A375<$S<63AAE$61K;@6$37K A34C1T58$248K@:[email protected];A1<> !B1$98AA8I;7C$341$5B1$<[email protected]$:8<5$:@4F1<$89$5B1$5B411$2A375<> > Long-run total cost (LRTC) ;<$5B1$A8I1<5$5853A$:8<5$89$248K@:;7C$37J$C;F17$A1F1A$89 [email protected]@5>$$*8E$;9$5B1$9;46$I3751K$58$248K@:1$A1<<$5B37$U8E$;[email protected]$G@;AK$5B1$<63AA1<5$2A375>$ +9$;5$I3751K$58$248K@:1$G15I117$U8$37K$UVE$;[email protected]$G@;AK$5B1$6;KKA1$<;R1$2A375>$$+9$;5$I3751K 58$248K@:1$6841$5B37$UVE$;[email protected]$G@;AK$5B1$G;C$2A375>$$+5<[email protected]$:8441<287K$58$5B1 <[email protected]$5853A$:8<5$:@4F1<$984$$5B8<1$<;R1$2A375<> Application: Allocation of Production among Multiple Plants Yet another approach. Maximize output for each level expenditures. 2 Long-run average as: Rearrange Equation (1)cost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or, maximum output, given expenditures, is obtained when the marginal product of an input per dollar spent on the input is the same. C. Shapes of Long-Run Cost Curves 84#$%&#*4*'/"!"#(0#"%(,$:,34#.("$"5#)&#0(342#$%*$#$%&#"(3,.&#(0#*#H:"%*1&2#*+&,*-& .("$#.3,+&#%*2#$(#2(#)!$%#2!6!4!"%!4-#,&$3,4"# ;E&.*3"&#"(6&#!413$"#)&,&#0!9&[email protected]##84#$%& © Bryan L. Boulier, 2011. All rights reserved. '(4-:,345#1,&"36*E'/#*''#!413$"#.*4#E&#+*,!&27##I&4.&5#$%&,&#*,&#1($&4$!*''/#4(#2!6!4!"%!4,&$3,4"7##J%*$#!"#$%&#"%*1&#(0#$%&#'(4-:,34#*+&,*-&#.("$#.3,+&#;C=>[email protected]##8"#!$#H:"%*1&2#(, 4($K B%&#"%*1&#(0#$%&#C=>?#2&1&42"#!4#1*,$#(4#$%&#1,(23.$!(4#034.$!(47##84#1*,$!.3'*,5 !$# 2&1&42"# (4# )%&$%&,# $%&# 1,(23.$!(4# %*"# .(4"$*4$# ,&$3,4"# $(# ".*'&# ;?=<@5# !4.,&*"!4,&$3,4"#$(#".*'&#;8=<@5#(,#2&.,&*"!4-#,&$3,4"#$(#".*'&#;L=<@7##=&$3,4"#$(#".*'&#,&0&,#$(#$%& .*"&#!4#)%!.%#*''#!413$"#*,&#!4.,&*"&2#!4#1,(1(,$!(47##?(4"!2&,#$%&#1,(23.$!(4#034.$!(4M ...
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This note was uploaded on 03/16/2011 for the course ECON 101 taught by Professor Fon during the Spring '06 term at GWU.

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