The figure below shows a firm's long-run average cost curve (LAC) in light 2. blue. Three of the short-run average total cost curves (4TC)-30 units of capital, 40 units of capital or 50 units of capital – that make up the firm's long-run envelope are tangent to LAC at points a, b, and c, respectively LAC ATC 7. ATC ATC 1.50 400 1,200 2,000 Output (Q) If the firm wishes to produce 400 units in the long run, which plant should the manager choose? What is the long-run average cost? 6. 5. 4. 3. Average cost (dollars)

The figure below shows a firm's long-run average cost curve (LAC) in light 2. blue. Three of the short-run average total cost curves (4TC)-30 units of capital, 40 units of capital or 50 units of capital – that make up the firm's long-run envelope are tangent to LAC at points a, b, and c, respectively LAC ATC 7. ATC ATC 1.50 400 1,200 2,000 Output (Q) If the firm wishes to produce 400 units in the long run, which plant should the manager choose? What is the long-run average cost? 6. 5. 4. 3. Average cost (dollars)

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 3.9P

See similar textbooks

Similar questions

What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?
A firm is considering an investment that will earn a 6 rate of return. If it were to borrow the money, it would have of pay 8 interest on the loan, but it currently has the cash, so it will But need to borrow. Should the firm make line investment? Show your work.
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
A common name for fixed cost is overhead. If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is 1,000. What does the average fixed cost curve look like? Use your response to explain what spreading the overhead means.
What is a long-run average cost curve?
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?
How do we calculate each of the following: marginal cost, average total cost, and average variable cost?
A small company that shovels sidewalks and driveways has 100 homes signed up for its services this winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method Choices are: Method 1: 50 units of labor, 10 units of capital Method 2: 20 units of labor, 40 units of capital Method 3: 10 units of labor, 70 units of capital If hiring labor for the winter costs $100/unit and a unit of capital costs 400, what is the best production method? What method should the company use if the cost of labor rises to $20/unit?