Long run average cost (lac), Microeconomics

Long Run Average Cost (or LAC)

-Constant Returns to Scale

  • If the input is doubled, the output will double and average cost is constant at all the levels of output.

-Increasing Returns to Scale

  • If the input is doubled, outputs will double and average cost decreases at all the levels of output.

-Decreasing Returns to the Scale

  • If input is doubled, increase in output is less than twice and the average cost increases with the output.

-In the long run:

  • Firms experience increasing and decreasing returns to scale and therefore long run average cost is "U" shaped.

-Long run marginal cost(LMC) leads long run average cost(LAC):

  • If LMC < LAC, LAC will decrease
  • If LMC > LAC, LAC will increase
  • Thus, LMC = LAC at the minimum of LAC

           347_long run  average cost curve.png

Question

-What is relationship between long run average cost and long run marginal cost when long run average cost is constant? 

Posted Date: 10/12/2012 3:25:39 AM | Location : United States







Related Discussions:- Long run average cost (lac), Assignment Help, Ask Question on Long run average cost (lac), Get Answer, Expert's Help, Long run average cost (lac) Discussions

Write discussion on Long run average cost (lac)
Your posts are moderated
Related Questions
determinate equilibrium price and quantity. if Qd=7-1/2p AND Qs=1/4P-1/2

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Depreciation T ax Shield The decrease in corporate income taxes suitable to the deductibility of depreciation from the firm's taxable earnings.  Although depreciat

what is a sub game perfect Nash equilibrium

demand for two market are P1=15-Q1&P2=25-Q2.the monopoly TC is C=5+3(Q1+Q2).What are ,output,profit&MR if the monopolist can price disc? riminate


TAKE A HYPOTHETICAL ECOMOMY AND CONSTRUCT THE CONSUMPTION SCHUDEL CONTAIN 10 PAIR OF HYPOTHETICAL VALUE OF AGGERGET INCOME AND CONSUMPTOIN

Borrowings: The widening fiscal gap led to a steep rise in the outstanding liabilities of the Central Government. The outstanding domestic debt of the Central Government as a

Balance of Payments and Developing Economies: It is well-known in development economics that UDCs invariably start as debtor economies. In the process of development itself, t

which is the following is an example of a firm''s derived demand?