Long-Run Costs and Output Decisions
Long-Run Costs and Output Decisions
Long-Run Costs
and Output Decisions
Appendix: External Economies and Diseconomies and the
Long-Run Industry Supply Curve
© 2004 Prentice Hall Business Publishing Principles of Economics, 7/e Karl Case, Ray Fair
Short-Run Conditions
and Long-Run Directions
C H A P T E R 8: Long-Run Costs and Output Decisions
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Maximizing Profits
C H A P T E R 8: Long-Run Costs and Output Decisions
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Firm Earning Positive
Profits in the Short Run
C H A P T E R 8: Long-Run Costs and Output Decisions
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Minimizing Losses
C H A P T E R 8: Long-Run Costs and Output Decisions
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Minimizing Losses
C H A P T E R 8: Long-Run Costs and Output Decisions
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Minimizing Losses
C H A P T E R 8: Long-Run Costs and Output Decisions
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Minimizing Losses
C H A P T E R 8: Long-Run Costs and Output Decisions
A Firm Will Shut Down If Total Revenue Is Less Than Total Variable Cost
CASE 1: SHUT DOWN CASE 2: OPERATE AT PRICE = $1.50
Total Revenue (q = 0) $ 0 Total revenue ($1.50 x 800) $ 1,200
Fixed costs $ 2,000 Fixed costs $ 2,000
Variable costs + 0 Variable costs + 1,600
Total costs $ 2,000 Total costs $ 3,600
Profit/loss (TR - TC) - $ 2,000 Operating profit/loss (TR - -$ 400
TVC)
Total profit/loss (TR - TC) - $ 2,400
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Short-Run Supply Curve
of a Perfectly Competitive Firm
C H A P T E R 8: Long-Run Costs and Output Decisions
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Short-Run Supply Curve
of a Perfectly Competitive Firm
C H A P T E R 8: Long-Run Costs and Output Decisions
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The Short-Run Industry Supply Curve
C H A P T E R 8: Long-Run Costs and Output Decisions
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Profits, Losses, and Perfectly Competitive
Firm Decisions in the Long and Short Run
C H A P T E R 8: Long-Run Costs and Output Decisions
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Weekly Costs Showing
Economies of Scale in Egg Production
C H A P T E R 8: Long-Run Costs and Output Decisions
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A Firm Exhibiting Economies of Scale
C H A P T E R 8: Long-Run Costs and Output Decisions
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The Long-Run Average Cost Curve
C H A P T E R 8: Long-Run Costs and Output Decisions
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Constant Returns to Scale
C H A P T E R 8: Long-Run Costs and Output Decisions
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Decreasing Returns to Scale
C H A P T E R 8: Long-Run Costs and Output Decisions
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A Firm Exhibiting Economies
and Diseconomies of Scale
C H A P T E R 8: Long-Run Costs and Output Decisions
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Optimal Scale of Plant
C H A P T E R 8: Long-Run Costs and Output Decisions
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Long-Run Adjustments
to Short-Run Conditions
C H A P T E R 8: Long-Run Costs and Output Decisions
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Short-Run Profits:
Expansion to Equilibrium
C H A P T E R 8: Long-Run Costs and Output Decisions
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Short-Run Losses:
Contraction to Equilibrium
C H A P T E R 8: Long-Run Costs and Output Decisions
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Short-Run Losses:
Contraction to Equilibrium
C H A P T E R 8: Long-Run Costs and Output Decisions
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Short-Run Losses:
Contraction to Equilibrium
C H A P T E R 8: Long-Run Costs and Output Decisions
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Long-Run Competitive Equilibrium
C H A P T E R 8: Long-Run Costs and Output Decisions
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Long-Run Adjustment Mechanism:
Investment Flows Toward Profit Opportunities
C H A P T E R 8: Long-Run Costs and Output Decisions
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Review Terms and Concepts
C H A P T E R 8: Long-Run Costs and Output Decisions
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Appendix: External Economies and Diseconomies
and the Long-Run Industry Supply Curve
C H A P T E R 8: Long-Run Costs and Output Decisions
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Appendix: External Economies and Diseconomies
and the Long-Run Industry Supply Curve
C H A P T E R 8: Long-Run Costs and Output Decisions
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Appendix: External Economies and Diseconomies
and the Long-Run Industry Supply Curve
C H A P T E R 8: Long-Run Costs and Output Decisions
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Appendix: External Economies and Diseconomies
and the Long-Run Industry Supply Curve
C H A P T E R 8: Long-Run Costs and Output Decisions