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Chapter 22: Q. d- For Critical Thinking (page 502)

What would likely happen to long-run average cost at Oman's facility if engineers encountered difficulties in maintaining the facility's substantial daily volume of oil production? Explain.

Short Answer

Expert verified

The average short-term cost depends on the quantity of goods produced. The long-term average cost includes fluctuations in the amount used for all inputs required for production.

Step by step solution

01

Introduction.

Oil production refers to the amount of extracted oil from the ground after inert materials and contaminants have been removed. Crude oil, natural gas liquids (NGLs), and additives are all included.

02

Long-Run Average Cost.

The unit priceforproducing a good or service over a long period of time when all inputs under the control of the entity fluctuate. In other words, the total long-term cost divided by the production volume.

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