SRATC or small plant SRATC tor medium plant SRATC for arge plant LRATC S500 Diseconomies of Scale S400+ Economies of Scale Constant Retums 1,000 1,200 Quantity of Computers (per day) Notice that the long-rum average total cost (LRATO aurve is much flatter than the short-run average total cost (SRATO curve. This is because frms can be more flexible in the long run-they can choose vtich short-run cost cure they want to operate along, by choosing their plant scale. But they cannot do this in the short run, during wtich they are stuck with their eesting short-run cost curve. That is, in the short run, the fim operates with the short run curve it has based on past decisions. However, in the long run, the firm is able to choose the short run curve it wants to use. In Exhibit 1 above, explain why the curve between A and B looks different than the curve from A to C. Provide an example of how a firm could opt to follow the A to C curve instead of the A to B curye.

SRATC or small plant SRATC tor medium plant SRATC for arge plant LRATC S500 Diseconomies of Scale S400+ Economies of Scale Constant Retums 1,000 1,200 Quantity of Computers (per day) Notice that the long-rum average total cost (LRATO aurve is much flatter than the short-run average total cost (SRATO curve. This is because frms can be more flexible in the long run-they can choose vtich short-run cost cure they want to operate along, by choosing their plant scale. But they cannot do this in the short run, during wtich they are stuck with their eesting short-run cost curve. That is, in the short run, the fim operates with the short run curve it has based on past decisions. However, in the long run, the firm is able to choose the short run curve it wants to use. In Exhibit 1 above, explain why the curve between A and B looks different than the curve from A to C. Provide an example of how a firm could opt to follow the A to C curve instead of the A to B curye.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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