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Unformatted text preview: ECON 3-2-2011 15:24 Short Run vs. Long Run Long Run: the time period in which all factors are variable o Factor usually most fixed: building, land etc Short Run: the time period in which at least one input is fixed Long Run Average Total Cost (LRATC) For each Q, the minimum of all possible ATC curves For short-term fluctuations in Q, the firm cant change FC. The firm will stay on its short run curves For long-term changes in Qthe firm expects to consistently produce at a different level of Qthe firm can change FC so that it is on its LRATC curve What could affect LRATC Special skills LRATC should be expected to affect firm size If a firm is operating in the increasing returns to scale ares, the firm lowers its LRATC by expanding firm production Industries over which LRATC is declining for large regions of Q are likely to be...
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This note was uploaded on 10/04/2011 for the course ECON 201 taught by Professor C.liedholm during the Spring '07 term at Michigan State University.
- Spring '07