What is the long-run average cost curve? What are the three ranges of output and in what order do they occur? Briefly define each of the three ranges
What will be an ideal response?
The long-run average cost curve shows the lowest average cost at which it is possible to produce each output when the firm has time to change both its labor force and its plant size. The long-run average cost curve is U-shaped and shows three possible production ranges. In order, these ranges are: economies of scale, constant returns to scale, and diseconomies of scale. Economies of scale are when a firm increases its output and its average total cost decreases. Constant returns to scale are when a firm increases its output and its average total cost does not change. Finally, diseconomies of scale are when a firm increases its output and its average total cost increases.
You might also like to view...
In perfect competition, if firms enter the market in the long run
A) total supply will increase causing market price to increase. B) total supply will decrease causing market price to decrease. C) total supply will decrease causing market price to increase. D) total supply will increase causing market price to decrease.
As long as marginal cost is less than average variable cost:
a. both average total costs and average variable costs will be falling. b. average total costs will be falling but average costs may be rising or falling. c. average fixed costs are rising. d. average total costs are falling but average fixed costs may be rising.
Research suggests that taller workers tend to earn more income than shorter workers. What does this suggest about the relationship between workers' height and their productivity?
The primary argument against active monetary and fiscal policy is that
a. attempts to stabilize the economy do not constitute a proper role for government in a democratic society. b. these policies affect the economy with a long lag. c. these policies affect the economy too quickly and with too much impact. d. history demonstrates that interest rates respond unpredictably to active policies, leading to unpredictable effects on income.