long run costs
Post on 31-Dec-2015
22 Views
Preview:
DESCRIPTION
TRANSCRIPT
KRUGMAN'SMICROECONOMICS for AP*
Long Run Costs
Margaret Ray and David Anderson
Micro:
Econ:
20
56
Module
What you will learnin this Module:
• Why a firm’s costs differ in the short run versus the long run.
• How a firm can enjoy economies of scale.
Returns to Scale
The long-run average cost curve for a firm is “U- shaped” like the short-run average cost curves – but for a different reason.
Short-run versus Long-run Costs
•The short run: at least one input is fixed (can not be changed)
•The long-run: all inputs are variable
Economies and Diseconomies of Scale
• Economies of Scale: the LRATC is falling as the firm expands.
• Diseconomies of Scale: the LRATC is rising as the firm expands.
Sunk Costs
• A sunk cost is a cost that has been incurred in the past and cannot be recovered.
• Sunk costs don’t matter in decision-making!
top related