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Lecture 1

ECON 1B03 Lecture Notes - Lecture 1: Variable Cost, Factor X


Department
Economics
Course Code
ECON 1B03
Professor
Hannah Holmes
Lecture
1

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ECON 1B03- Week 9 October 10, 2018
Module 5
Unit 7.5
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).
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