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)

Competitive equilibrium, Let Consider the following insurance market. There...

Let Consider the following insurance market. There are two states of the world, B and G , and two types of consumers, H and L, who have probabilities p H =0.5 and p L

Chapter 8, once vaccinated,a person cannot catch a cold or give a cold to s...

once vaccinated,a person cannot catch a cold or give a cold to someone else. As a result,the marginal social benefit resulting from consumption of the vaccine.

Linear break even analysis, what do you understand by linear break-even poi...

what do you understand by linear break-even point? in what way is it useful in managerial economics? what are the assumptions underlying the analysis?

Define the term supply, Demand is defined as a schedule of the quantities f...

Demand is defined as a schedule of the quantities fo good that will be purchased at various prices similarly the supply refers to the schedule of the quantities of a good that will

How to do economic analysis of companies, For the purposes of economic anal...

For the purposes of economic analysis, a normal profit contains the cost of the lost opportunity of the next best option allocation of the firms resources.  In a purely competitive

Point elasticity, Point elasticity: It refers to measurement of elasticity ...

Point elasticity: It refers to measurement of elasticity on a point On a demand curve. Point elasticity helps in measuring elasticity where change in price and quantity is infinite

Protec tionism and free trade, what is the south africas governments standp...

what is the south africas governments standpoint on international trade

Essentials of Economics, Figure 3.7 in the above textbook. Using the figure...

Figure 3.7 in the above textbook. Using the figure in guide, determine the approximate size of the market surplus or shortage that would exist at a glance of a) $40 b) $20

Short run versus long run, The Short Run versus long Run - Short-run: ...

The Short Run versus long Run - Short-run: Period of time in which the quantities of one or more production factors cannot be changed. These inputs are called as fi

Project, I have to make a research paper project on Investigating the buyin...

I have to make a research paper project on Investigating the buying behavior of individuals in the white goods sector and seeing if there exists any negative relationship between d

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