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)

What do you meant by progressive tax, Q. What do you meant by Progressive T...

Q. What do you meant by Progressive Tax? Progressive Tax:Tax is considered progressive if a larger proportionate share of its total burden falls on individual'swith higher avera

Rent, explain two theories of economic rent

explain two theories of economic rent

Lending capacity of cash, Assume the banking system contains: Total Rese...

Assume the banking system contains: Total Reserves                         $ 80 billion Transactions Deposited          $800 billion Cash held by public                 $1

Effects of global economic crisis, The global financial crisis, brewing for...

The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. It originated from countries with highly sophisticated fin

Whata are the non-renewable resource, How does the approach of someone who ...

How does the approach of someone who has adopted the precautionary principle differ from someone with a blind faith in substitutability, when it comes to a non-renewable resource l

Define the returns to scale in production technology, Define the returns to...

Define the returns to scale in production technology. Returns to scale in production technology: Assume that we are using some vector of inputs x to generate some output y a

Duopoly, write characterstics of duopoly

write characterstics of duopoly

Limitations of Valence Bond Theory, Valence Bond Theory Explains, but does ...

Valence Bond Theory Explains, but does not predict the shape. Valence Bond Theory Cannot explain colour and spectra. Valence Bond Theory Qualitative explanations; does not expl

Demographicwindow, what do you understand by demographic window acess by in...

what do you understand by demographic window acess by india

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