ECON 1B03 Lecture Notes - Lecture 1: Variable Cost, Factor X
This preview shows page 1. to view the full 4 pages of the document.
ECON 1B03- Week 9 October 10, 2018
Long Run Costs of Production
Costs in the LR
• Because many costs are fixed in the short run but variable in the long run, a firm’s long-
run cost curves differ from its short-run cost curves.
• Jerry’s factory size is fixed in the SR (it’s a fixed input)
• In the SR, the cost of the factory is fixed.
• In the LR, Jerry can build a bigger factory, buy more machines, etc.
• In the LR, his factory cost is a variable cost.
• Consider 3 different sizes of factories Jerry could build in the LR:
• A small factory
• A medium-sized factory
• A large factory
There is a different set of SR cost curves for each size of factory (once you build the plant, you
incur new fixed costs, so for every LR there’s an associated SR).
You're Reading a Preview
Unlock to view full version