cc Long run average cost curve a curve that defines the minimum average cost of

# Cc long run average cost curve a curve that defines

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cc.Long-run average cost curve: a curve that defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of both fixed and variable factors of production. Verspreiden niet toegestaan | Gedownload door Fatima Oulmouden ([email protected])lOMoARcPSD
dd.Economies of scale: exist when long-run average costs decline as output is increased. ee.Diseconomies of scale: exist when long-run average costs rise as output is increased. ff.Constant returns to scale: exist when long-run average costs remain constant as output is increased. 2.Key points a.To maximize profits, a manager should use inputs at levels at which the marginal benefit equals the marginal cost. Verspreiden niet toegestaan | Gedownload door Fatima Oulmouden ([email protected])lOMoARcPSD
b.When output is produced with both capital and labor, the average product of labor will depend not only on how many units of labor are used but also on how much capital is used (Cobb-Douglas production function). c.Linear production function implies isoquants that are linear. This is because the inputs are perfect substitutes for each other and the rate at which the producer can substitute between the inputs is independent of the level of input usage. d.The Leontief production function implies isoquants that are L shaped. Inputs must be used in fixed proportions: the manager cannot substitute between capital and labor and maintain the same level of output. e.For the Leontief production function there is no MRTS, because there is no substitution among inputs along an isoquant. f.To produce more output, more of the variable factor must be employed. g.Since average fixed costs decline as output is expanded, this difference between average total and average variable costs diminishes as fixed costs are spread over increasing levels of output. h.A decision maker should ignore sunk costs to maximize profits or minimize losses. i.3.Formulas Verspreiden niet toegestaan | Gedownload door Fatima Oulmouden ([email protected])lOMoARcPSD