Long run average cost (lac), Microeconomics

Assignment Help:

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? 


Related Discussions:- Long run average cost (lac)

Cost curves, what are the various types of cost curves?

what are the various types of cost curves?

Elasticity, Five uses of elasticity on the Public Sector and five uses of e...

Five uses of elasticity on the Public Sector and five uses of elasticity on the Private Sector.

PPF, draw a PPF when a hurricane slows down the nest two months of butter p...

draw a PPF when a hurricane slows down the nest two months of butter production?

#Monopoly, How to prepare an assignment of Monopoly in economics#Minimum 10...

How to prepare an assignment of Monopoly in economics#Minimum 100 words accepted#

Market Demand, Ask quesThe market demand for brand X has been estimated as ...

Ask quesThe market demand for brand X has been estimated as Qx = 1,500 - 3Px - 0.05I - 2.5Py + 7.5Pz where Px is the price of brand X, I is per-capita income, Py is the price of

Labour economics, Consider the following flow (in thousands of people) betw...

Consider the following flow (in thousands of people) between the various labour market states in a particular month:

Supply and demand, Suppose scientists discover that eating soybeans prevent...

Suppose scientists discover that eating soybeans prevents cancer and heart disease. What effect would you predict on the price of soybeans?

Product transformation curve, Production: - Firms should choose how muc...

Production: - Firms should choose how much of each to produce. - The alternative quantities can be illustrated by using product transformation curves. Product Transforma

Tax, if the inverse demand curve is p = 120 - Q and the marginal cost is co...

if the inverse demand curve is p = 120 - Q and the marginal cost is constant at 10, how does charging the monopoly optimum and the welfare of consumers, the monopoly, and society?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd