Relationship between long run short run average cost curves
Download
1 / 14

Relationship between long-run & short-run average cost curves - PowerPoint PPT Presentation


  • 112 Views
  • Uploaded on

Relationship between long-run & short-run average cost curves. SRAC 5. SRAC 1. SRAC 4. SRAC 2. SRAC 3. LRAC. Cost. O. Q 0. Q 1. Q 2. Q 3. Output. Deriving a firm’s AR & MR curves: ‘price-taking’ firm. (a) The market. (b) The firm. P. P. TR at Q = 800. S. AR,MR (Rs).

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

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


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Relationship between long run short run average cost curves
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


Tr curve
TR curve curves

TR

TR

4000

2000

Q

O

400

800


Revenue of a price making firm facing a downward sloping demand curve
Revenue of a ‘price-making’ firm facing a downward sloping demand curve

6

4

2

0

-2

-4


The market
The market sloping demand curve

Rs Crores

S

S`

P1

P2

D

O

Q1

Q2

Q


Revenue of a price making firm facing a downward sloping demand curve1
Revenue of a ‘price-making’ firm facing a downward sloping demand curve

6

4

2

0

-2

-4


elastic sloping demand curve

r

Inelastic

AR , MR Rs. Crores

AR

X

Q

MR


Total revenue for a firm facing a downward sloping demand curve
Total revenue for a firm facing a downward sloping demand curve

Є = 1

Є > 1

Є < 1

TR

1

3

5

7



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


TABLE curve

4

8

2

6

2

4

4

2

7

0

11

-2

20

-4


MC curve

MR > MC

MC, MR

e

MR < MC

Q

Q*

MR


MC curve

TR = OKLQ*

Costs, revenue

AC

K

L

AR = 6

F

T

AC= 42/3

AR

Q

Q*

Π = KLTF

TC = OQTF

MR


Loss minimizing output
Loss minimizing output curve

Costs, revenue

MC

AC

AC

Loss

AR

AR

Q

O

Q*

MR


ad