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)

Production and cost, Q=2h find the marginal point. where q is the quantity ...

Q=2h find the marginal point. where q is the quantity of electricity in MW-h and h is the amount of water (in 100s of liters per hour)

Concept of elasticity of demand, Question (a) Describe clearly the thre...

Question (a) Describe clearly the three concepts of elasticity of demand. Use appropriate examples and diagrams to support your answer. (b) Consider you have been appointed

MARKET TARGETING STATERGIES, A MANUFACTURING UNIT IS INTERESTED IN DEVELOPI...

A MANUFACTURING UNIT IS INTERESTED IN DEVELOPING A BENEFIT SEGMENTATION OF THE CAMERA MARKET. SUGGEST SOME MAJOR BENEFIT SEGMENT WITH MARKET TARGETING STRATEGIES?

Foreign exchange markets, FOREIGN EXCHANGE MARKETS: A foreign exchange...

FOREIGN EXCHANGE MARKETS: A foreign exchange market (sometimes informally called the forex market, or denoted FEM) is a market in which different currencies are bought and sol

Benefits of education, Benefits of Education The returns a person/soci...

Benefits of Education The returns a person/society (state/government) gets from acquiring education is referred to as benefits from education. If such returns are paid/receive

Uses and habit forming commodity -price elasticity of demand, Uses and Habi...

Uses and Habit Forming Commodity -price elasticity of demand: The number of possible uses : A commodity has high price elasticity of demand (or elastic demand) if it can be p

Vitamin a, 1) Vitamin A Vitamin A has been chosen as the vitamin to be incl...

1) Vitamin A Vitamin A has been chosen as the vitamin to be included in the supplement since it has a role in several functions some of which as follows: 1. Helps in proper vision.

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