Lecture 13-Production Function

25 views3 pages
Published on 1 Aug 2010
School
Department
Course
Professor
Thursday, October 29th, 2009. Production Function
)LUP¶V/RQJ-run Average Total Cost Schedule:
1. ,QVKRUWUXQ*0PXVWKLUHPRUHZRUNHUVWRLQFUHDVHRXWSXW³/DZRI'LPLQLVKLQJ
5HWXUQ´DSSOLHV
2. In long run, GM can build more assembly paints as well as hire more workers
2.1 ³/DZRI'LPLQLVKLQJ5HWXUQV´GRHVnot apply
2.2 MP does not necessarily fall after some point Æ MC does not necessarily rise
3. Suppose firm doubles all inputs
a) Output doubles (constant returns to scale) Æ ATC unchanged
b) Output less than doubles (diseconomies of scales) Æ ATC increases
c) Output more than doubles (economies of scale) Æ ATC falls
Long-run Average Total Cost Curve
ATC
Constant Returns to Scale
The property whereby long-run
average total cost stays the same
as the quantity of output changes
Q
ATC
Diseconomies of Scale
The property whereby long-run
average total cost rises as the
quantity of output increases
Q
www.notesolution.com
Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Grade+

Unlimited access to all notes and study guides.

YearlyMost Popular
75% OFF
$9.98/m
Monthly
$39.98/m
Single doc
$39.98

or

You will be charged $119.76 upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.