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Relationship between long-run & short-run average cost curvesPowerPoint Presentation

Relationship between long-run & short-run average cost curves

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## PowerPoint Slideshow about ' Relationship between long-run & short-run average cost curves' - madison

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Relationship between long-run & short-run average cost curves

SRAC5

SRAC1

SRAC4

SRAC2

SRAC3

LRAC

Cost

O

Q0

Q1

Q2

Q3

Output

Deriving a firm’s AR & MR curves: ‘price-taking’ firm curves

(a) The market

(b) The firm

P

P

TR at Q = 800

S

AR,MR (Rs)

TR at Q = 400

D = AR = MR

5

5

D

Q

O

Q

O

200

400

600

800

1000

1200

1m

2m

3m

m = millions

Scale on x axis curve

Smooth curves

π = Vertical distance

between the TC & TR

TR, TC

TC

MAX π = 18 – 14 = 4

18

TR

14

Q

T π

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