Module 15. Costs in the Long Run. 1. Objectives. Define long run average cost. Objectives. Define long run average cost. Understand how to construct the long run average cost curve. 3. Objectives. Define long run average cost.
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Costs in the Long Run
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Objectives
Define long run average cost.
Objectives
Definelong run average cost.
Understand how toconstructthe long run average cost curve.
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Objectives
Define long run average cost.
Understand how to constructthe long run average cost curve.
Define the concept of returns to scale, and understand how it affects the shape of the long run average cost curve.
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Objectives
Define long run average cost.
Understand how to construct the long run average cost curve.
Define the concept of returns to scale, and understand how it affects the shape of the long
run average cost curve.
Define minimum efficient scale (MES) and be able to identify the MES on a graph.
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Objective 1: Define long run average cost curve
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Objective 1: Define long run average cost curve
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Objective 1: Define long run average cost curve
Total Cost ÷ Quantity
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Objective 1: Define long run average cost curve
Total Cost ÷ Quantity
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Objective 2
Understand how to construct a
long run average cost curve
to meet its production needs. It can adjust all its inputs.
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Objective 2
Understand how to construct a
long run average cost curve
to meet its production needs. It can adjust all its inputs.
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Objective 2
Understand how to construct a
long run average cost curve
to meet its production needs. It can adjust all its inputs.
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Objective 2: …constructing a long run average cost curve
Objective 2: …constructing a long run average cost curve
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Objective 2: …constructing a long run average cost curve
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Objective 2: …constructing a long run average cost curve
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Objective 2: …constructing a long run average cost curve
Objective 2: …constructing a long run average cost curve
rate of output per period.
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Objective 2: …constructing a long run average cost curve
rate of output per period.
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Objective 2: …constructing a long run
average cost curve
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Objective 2: …constructing a long run
average cost curve
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Objective 2: …constructing a long run average cost curve
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Objective 2: …constructing a long run average cost curve
scalloped curve.
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Objective 2: …constructing a long run average cost curve
Objective 2: …constructing a long run average cost curve
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Objective 3
Define the concept of returns to scale and understand how it affects the shape of the long run average cost curve
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Objective 3
Define the concept of returns to scale and understand how it affects the shape of the long run average cost curve
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Objective 3
Define the concept of returns to scale and understand how it affects the shape of the long run average cost curve
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Objective 3
Define the concept of returns to scale and understand how it affects the shape of the long run average cost curve
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Objective 3: …returns to scale
run average cost tends to fall. We say that the
firm experiences increasing returns to scale or economies of scale.
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Objective 3: …returns to scale
run average cost tends to fall. We say that the
firm experiences increasing returns to scale or economies of scale.
its long run average cost falls as output increases and therefore, the long run average cost curve is downward sloping.
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Objective 3: …returns to scale
We say that production displays constant returns
to scale.
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Objective 3: …returns to scale
We say that production displays constant returns
to scale.
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Objective 3: …returns to scale
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Objective 3: …returns to scale
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Objective 3: …returns to scale
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Objective 4
Define minimum efficient scale ….
a portion of declining average cost, followed by a range of output over which average costs are constant, and ultimately
a segment of increasing average cost.
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Objective 4
Define minimum efficient scale ….
a portion of declining average cost, followed by a range of output over which average costs are constant, and ultimately
a segment of increasing average cost.
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Objective 4:….and be able to identify the minimum efficient scale on a graph
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Objective 4:….and be able to identify the minimum efficient scale on a graph
rate of output at which long run average cost is
minimized.
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Objective 4: ….and be able to identify the minimum efficient scale on a graph.
on the graph.
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Objective 4: ….and be able to identify the minimum efficient scale on a graph.
on the graph.
highest rate of output at which long run average
cost is minimized.
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Objective 4: ….and be able to identify the minimum efficient scale on a graph.
and maximum efficient scales have identical and minimal average costs. No firm has a
cost advantage over other such firms because of its size.
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Costs in the Long Run
Song:That’s All Folks
(Looney Tunes closing theme)
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