12 Economic Costs (1)

20 and produces 6 gallons of smoothies an hour at a

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Unformatted text preview: Total Costs Average Costs Total Cost at 5 Gallons = $26.20 Total Cost at 6 Gallons = $28.00 Average Cost at 5 Gallons = $5.24 (=TC/Q=$26.20/5) Average Cost at 6 Gallons = $4.67 (=TC/Q=$28.00/6) Marginal Costs Marginal Cost at 6 Gallons = $1.80 (= TC/ Q=(28.00-26.20)/(6-5) 10 10 Long Run Costs In the Long Run, the firm can vary the In quantity of labor (L) (variable in the short run) and quantity of capital (K) (fixed in the short run). run). 11 11 Changing Amount of Labor and Changing Capital Could Cause 1 of 3 Things Capital Economies of Scale: Output increases by an Economies even higher % than the % a firm increases its inputs (K and L) by. inputs Diseconomies of Scale: Output increases by a Diseconomies smaller % than the % a firm increases...
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This document was uploaded on 03/23/2014.

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