Long Run Costs

Question 1

Long Run meaning

Answer 1

all fop are variable

Question 2

as its logn run means bs can

Answer 2

increase any FOP

Question 3

What is scale

Answer 3

when bs increases aany FOP

Question 4

The LR is all about

Answer 4

returns to scale

Question 5

returns to scale

Answer 5

Relationship between increases in the Q of a firms inputs and teh prop change in output

Question 6

shape of LRAC due to

Answer 6

returns to scale

Question 7

Long run consists of

Answer 7

lots of SR

Question 8

Why does LR consist of lots of diif SRs

Answer 8

intially bs confined by FFOP
but eventually can increase FOP
but then confined again by new lvl of FOP
till they can increase again

then when we join these up get LRAC

Question 9

Whats on y axis of long run costs

Answer 9

cost

Question 10

what’s on x axis of long run costs

Answer 10

output

Question 11

describe and draw LR cost

Answer 11

smooth bucket shape

Question 12

Split LRC into 3 , what happens in stage 1

Answer 12

Business is experiencing increasing returns to scale

Question 13

What si icnreasing returns to sclae

Answer 13

when % change in ouptut > than percentage change in input

Question 14

why is the increasing returns to scale/1st part of LRAC graphs haped liekd that

Answer 14

when bs increase FOP get more out than what was put in
costs increase but output increases faster
therefore average costs decreases

Question 15

What is decreasing returns to scale

Answer 15

when % change in output less than % change in input

Question 16

why is the decreasing returns to scale/1st part of LRAC graphs haped liekd that

Answer 16

business increasing FOP means costs are rising
but getting less out in return
so quantities rising but slower than the increasing costs
therefore average costs increase

Question 17

What is constant returns to scale

Answer 17

when %change in output = %change in input

Question 18

in constant returns to scale as the % change in outptu and input are equal waht is the curvwe shaped liek

Answer 18

(AC which are flat and) constant

Question 19

businesses have increasing/decreasing returns to scale due to

Answer 19

dis/economies of scale

Question 20

when bs experiences economies to scale they get

Answer 20

increasing returns to scale

Question 21

Minimum efficient scale is

Answer 21

lowest lvl of output at which avg total COSTSOP are minimised

Question 22

Where+ draw is the MES

Answer 22

lowest lvl output wehreby avg cost curve stops decreasing

Question 23

after the MES what happens

Answer 23

no more EOS
jsut constant returns to sclae

Question 24

Why is the MES important for bs to know

Answer 24

so they know after that point/quantity costs cant get any lower

Question 25

Draw the two alt econ of s

Answer 25

smile face

makeshift AFC curve

Question 26

Why is smiley face incorrect

Answer 26

unrealistic as dont show constant returns
claims when bs hits MES straight away xp disecon/decreasing RTS

which is rare as there’s always period of constant returns

Question 27

ask about natural monopoly LR CC

Answer 27

YAH