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Chapter 22: Q. 22.4LO (page 486)

Describe the long-run cost curves a typical firm faces and define a firm's minimum efficient scale

Short Answer

Expert verified

No costs are fixed within thelong term.

A corporation can produce its product cheaply enoughto supply it at a competitive price.

Step by step solution

01

Introduction

The medium term is a timespan over which all production and cost variables are uncertain. Firms ’ ability to change all overall costs, but they can only impact costs in the near term by modifying output levels. Therefore, while a firm may have a mono in the short run, it may face opposition in the long term.

02

Explanation

The future is that the period of your time when all costs are variable. The future depends on the specifics of the firm in question—it isn't an exact period of your time. No costs are fixed within the long term. A firm can build new factoriesand buy new machinery.
The minimum efficient scale (MES) is that the point on a price curve when

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Most popular questions from this chapter

An electricity-generating company confronts the following long-run average total costs associated with alternative plant sizes. It is currently operating at plant size G.

a. What is this firm's minimum efficient scale?

b. If damage caused by a powerful hurricane generates a reduction in the firm's plant size from its current size to B, would there be a leftward or rightward movement along the firm's long-run average total cost curve?

In an effort to reduce their total costs, many companies are now replacing paychecks with payroll cards, which are stored-value cards onto which the companies can download employees' wages and salaries electronically. If the only factor of production that a company varies in the short run is the number of hours worked by people already on its payroll, would shifting from paychecks to payroll cards reduce the firm's total fixed costs or its total variable costs? Explain your answer.

If short-run average variable costs and marginal costs decline at every feasible quantity of output, what (if anything) happens to the positions of the AVC, AFC, ATC, and MC curves? Explain.

The cost structure of a manufacturer of microchips is described in the table that follows. The firm's fixed costs equal $10per day. Calculate the average variable cost, average fixed cost, and average total cost at each output level.

There is an old saying that "two heads are better than one. "Why might this saying be more likely to hold true in producing output when the two heads involved are acquainted and have experience with tasks than when they seek to produce output after randomly getting together?
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