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SIU ECON 240 - Economies scale
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Econ 240 1st Edition Lecture 13 Outline of Last Lecture I.Short – run cost a.Total Cost b.Total variable costc.Total fixed cost II.Average cost a.Average fixed cost b.Average variable cost c.Average total cost III.Marginal cost Outline of Current Lecture II.Marginal Cost a.Short run average cost curve b.Long run average costIII.Economies of scale IV.Diseconomies of scaleCurrent LectureMarginal Cost- MC is U shaped - MC intersects AVC at minimum AVC- MC intersects ATC at minimum ATC- The Short Run average cost curve shows ATC when some inputs are fixedThese 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.- The Long Run averages cost curve shows ATC when all inputs can be changed (called change in scale).◦ The Long Run average cost (RAC) is the lowest of all possible short – run average total costs Economies of Scale - A firms doubles its scale (all inputs), and its output more then doubles.- The average total cost falls (ATC = TC/Q)- Economies if scale usually occur when a firm has small scale - They occur mainly due to specialization of both labor and capital Diseconomies of Scale- Firm doubles its scale (all inputs), and its output less than doubles - The average total cost increases (ATC = TC/Q)- Diseconomies of scale usually occur when a firm has achieved a large scale- They arise from increase difficulty of managing a sprawling business enterprise


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SIU ECON 240 - Economies scale

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