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In lesson 7b we calculated and
graphed SHORT RUN costs when the size of the factory was
fixed (did not change). Here we will learn how costs change
in the LONG RUN. In the long run we can change the size of
the factory. Only in the long run can new firms enter an
industry and only in the long run can firms leave the
industry (go out of business). Be sure that you can define
"short run" and "long run".
As always, be sure you know why the
long run ATC curve has the shape it does; For all graphs:
DEFINE, DRAW, DESCRIBE the shape.
Note that in the next unit (unit 3)
we will use long run graphs to find the allocatively
efficient quantity and the productively efficient
quantity.
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