IV. SR and LR costs for Different Cost Industries

Costs and Production

I. TPL, MPL, APL / TC, AC, MC/ MPL, APL VS MC, AVC

Production Max APL: MPL=APL	Costs Min AC: AC=MC

II. SREP VS LREP and SR TC VS LR TC

Isocost: TC^SR= TC^LR= SREP (SR expansion path)=all points of production in SR (K fixed) LREP (LR expansion path)=all points of production in LR (both L and K are variable) Assume Q↑ SR: TC↑ to TC^SR(point B= Kconst L↓)) LR: TC↓ from TC^SR to TC^LR(point C=K↑L↓) 1. LR is more elastic than SR (более широкие графики в LR) 2. TC SR is ALWAYS higher or equal to TC LR as K is fixed in SR 3. Point A (intersection of LR and SR costs) on TC graph can lie to the left, to the right or exactly at the inflection point, depending on the type of cost industry

III. SR and LR costs general case

1. LR is more elastic than SR (более широкие графики в LR) 2. All SR and LR costs intersect under the same output QA TC^SR=TC^LR; MC^SR=MC^LR; AC^SR=AC^LR 3. All previous rules hold: Min AC^SR: AC^SR=MC^SR Min AC^LR: AC^LR=MC^LR 4. Point A (intersection of LR and SR costs) on TC graph can lie to the left, to the right or exactly at the inflection point, depending on the type of cost industry

IV. SR and LR costs for Different Cost Industries

ALWAYS REMEMBER: IRS => DCI (decreasing cost industry AC^LR is decreasing) DRS => ICI (increasing cost industry AC^LR is increasing) CRS => CCI (constant cost industry AC^LR is constant)

BUT NOT VICE VERSA!

DCI => IRS

ICI => DRS

CCI => CRS

DCI

ICI

CCI

(AC^LR is decreasing; TC^LR is concave)

(AC^LR is increasing; TC^LR is convex)

(AC^LR is constant; TC^LR is constant)

The only case when: AC^SR=AC^LR exactly at the point of Min AC^SR

Дата добавления: 2015-11-16