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)

Mixed economy, How solve central problem of economy in mixed economic syste...

How solve central problem of economy in mixed economic system?

Compute the following price elasticities of demand, #• The price of a lapto...

#• The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded. • The price of a pack of cigarettes increases by 10% and there is a 5% drop in the quan

the bundle containing more bread, Assume that John has the following prefe...

Assume that John has the following preference relation over two goods, bread and bear (x1, x2). He strictly prefers any bundle x over y whenever x haves more bear than y, whatever

Difference between accounting profit and economic profit, Difference betwee...

Difference between accounting profit and economic profit: The difference between accounting profit and economic profit is that economists include in total cost of production b

Natural environment for economics, Q. Natural environment for economics? ...

Q. Natural environment for economics? Environment: The natural environment is an essential aspect of the economy, whose influence is felt in several different ways. Everyone

Fresnel approximation of a spherical wave, Show that when a plane wave is t...

Show that when a plane wave is transmitted through a thin lens of focal length f in the direction parallel to the optical axis of the lens, its converted into a paraboloid wave (th

Economics, What are the factors that producers in the society may take into...

What are the factors that producers in the society may take into consideration when deciding on the what to produce,how to produce and for whom ?

Cost, relationship between tfc , tvc , tc

relationship between tfc , tvc , tc

What is expenditure function, What is Expenditure Function? The Expendi...

What is Expenditure Function? The Expenditure Function: When preferences satisfy the local nonsatiation assumption, in that case v(p, m) will be strictly increasing into m.

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