Beyond a certain level of output, the short-run marginal cost witl rise because there is no fixed input and costs will increase at least one input is fixed and eventually diminishing returns will occur the cost of the variable input increases when marginal product increases the demand for the good decreases when production is limited mp Einput prices increase when production increases and consumption is timited

Beyond a certain level of output, the short-run marginal cost witl rise because there is no fixed input and costs will increase at least one input is fixed and eventually diminishing returns will occur the cost of the variable input increases when marginal product increases the demand for the good decreases when production is limited mp Einput prices increase when production increases and consumption is timited

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

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Cost SRATC, واج The crpés 1,2, and 3 for the SRATC on refer to different plant sares LRAC SRATC, SRATC₂ 9 a OA The fimm cannot produce at point C because there is no SRATC curve through this point OB. The tem may choose to remain at point B until the price of its output increases enough to justify building a new plant OC. If the firm continues to produce at point B for any period of time & must be because it is not proft-maximizing OD. If this em continues to produce at point B for any period of time it must be because it is not cost-minimizing OE There can be a significant time delay while the fim readjusts to plant size, during which time remains at point B
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