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2 cards from this section. Quick, good the night before a test.
What is the long run average cost?
Think of total cost in relation to quantity produced.
Define long run marginal cost.
Consider how output changes with costs.
What does LRAC stand for?
Think about its relation to inputs being variable.
The LRMC curve typically behaves in what manner?
Consider its relationship to average cost.
A factory doubles its inputs (labor, machinery) and sees a 150% increase in output. What can you conclude about its returns to scale?
Compare the percentage increases in inputs and output.
Calculate the LRAC if a firm has total costs of $500 for producing 100 units. If production increases to 200 units with total costs of $900, what trends do you observe?
Think about how costs per unit compare at different output levels.
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