ECON 1100 1nd Edition Lecture 21 Outline of Last Lecture I. Short-Run EquilibriumII. Are you doing well?III. Should you shut down?Outline of Current Lecture I.Long-Run Cost CurvesCurrent LectureI. Long-Run Cost CurvesEvery firm has cost curvesIf producing where the SRATC curve is declining, then the AFC are decreasingIf producing where the SRATC curve is increasing, then the MC is higher and the AVC is risingIf production is to the left of X, then produce at the smaller firm, if to the right of X, then produce at larger firmThe more you produce, the thinner the overhead is spreadMC rising = costs more & more to produce the outputBigger plant = AFC increasing but won’t reach maximal output as quicklyAFC=TFC/q -> called overhead Won’t ever get to 0increasing return to scale or economies of scaleCan do the opposite (start low & go high) called decreasing return to scale ordiseconomies of scaleThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.LRATC does not go through crossing of SRATC &
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