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)

Consumer behaviour, how do I explain the hicksian and slutsky theory of con...

how do I explain the hicksian and slutsky theory of consumer behaviour in an examination

Divisional structure, Divisional Str ucture Some organizations...

Divisional Str ucture Some organizations run as a number of divide, autonomous business units, synchronized by a central headquarters. This is a divisional structure.

Home work help, Exercise on Demand, supply and market equilibrium Given th...

Exercise on Demand, supply and market equilibrium Given the following determinants of demand and supply, briefly explain, using appropriate diagram, the nature of relationships be

What are some ways for increase revenue, You've been contacted by a local s...

You've been contacted by a local semi-professional team in Colfax, known locally as the Colfax Thunder. They play their home games at the HS baseball park for only $100 per month.

#monopoly, Write a 1-2 page summary on markey failure

Write a 1-2 page summary on markey failure

General equilibrium , How to solve general equilibrium in pure exchange eco...

How to solve general equilibrium in pure exchange economy with 2 consumer and 3 commodities

Rule of thumb method, Rule of Thumb Method Sir Ashby had been requeste...

Rule of Thumb Method Sir Ashby had been requested in 1960 by the Government of Nigeria to submit a report on manpower development in Nigeria. In doing so, in the absence of re

Private property regime , Normal 0 false false false EN...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Non-tradable, Non-Tradable:Some products can't be transported over long dis...

Non-Tradable:Some products can't be transported over long distances or otherwise sold to consumers from far-off locations. These products (including some goods as well as most serv

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