FIGURE 9.8 The long-run average-total- cost curve: unlimited number of plant sizes. If the number of possible plant sizes is very large, the long-run average-total-cost curve approximates a smooth curve. Economies of scale, followed by diseconomies of scale, cause the curve to be U-shaped. Long-run ATC Q Output Average total costs

FIGURE 9.8 The long-run average-total- cost curve: unlimited number of plant sizes. If the number of possible plant sizes is very large, the long-run average-total-cost curve approximates a smooth curve. Economies of scale, followed by diseconomies of scale, cause the curve to be U-shaped. Long-run ATC Q Output Average total costs

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: The Cost Of Production

Section: Chapter Questions

Problem 6CQQ

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Similar questions

How does fixed cost affect marginal cost? Why is this relationship important?
What shape of a long-run average cost curve illustrates economies of scale, constant returns to scale, and diseconomies of scale?
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
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What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
What shapes would you generally expect each of the following cost curves to have: fixed costs, variable costs, marginal costs, average total costs, and average variable costs?