d) Long-run cost curves
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6 Terms
show a long-run cost-output curve
state the reason for the shape of the SRAC curve
law of diminishing marginal returns
state the reason for the shifts of the SRAC curve
in long run
→ all factors are variable
→ changes in AFC + AVC
→ curve shifts
state the reason for the decrease in the LRAC curve
scale of production increases
input increases < output increases
cost of input < revenue from output
average costs decrease
state the reason for the constant of the LRAC curve
increase in inputs = increase in outputs
state the reason for the increase in the LRAC curve
scale of production increases
input increases > output increases
cost of input > revenue from output
average costs increase
