What is a synergy or cost complementarity?
What is a synergy or cost complementarity?
What is a synergy or cost complementarity? a. the cost of producing different products offered by separate companies would be more expensive when produced by one company b. the cost of producing two products jointly by one firm is lesser than the cost of producing them separately c.
What is the shape of Long Run Average Cost Curve?
The long-run cost curves are u shaped for different reasons. It is due to economies of scale and diseconomies of scale. If a firm has high fixed costs, increasing output will lead to lower average costs.
Why is the average cost curve U shaped?
The average cost curve is u-shaped because costs reduce as you increase the output, up to a certain optimal point. From there, the costs begin rising as you increase the output. As you increase the output and variable costs, the average cost reduces because the output adds value to the consumer.
What is LAC curve?
The LAC curve is a planning curve because it is the curve which helps a firm to decide which plant is to be established in order to produce an output level consistent with the optimal cost. The firm selects that short run plant which yields the minimum cost of producing the anticipated output level.
What do the long run marginal cost and average cost curves look like?
In the long-run, all costs are variable costs. There is no fixed cost. According to modern theory of cost curves, long-run average cost curve (LAC) and long-run marginal cost curve (LMC) are L-shaped and not U-shaped as maintained by the traditional theory.
Why is long run cost curve flat?
That is, in the long period, the total fixed costs can be varied, whereas in the short period, this amount is fixed absolutely. Thus, LAC curves are flatter than the short-run cost curves, because, in the long-run, the average fixed cost will be lower, and variable costs will not rise to sharply as in the short period.
What is the relationship between average cost and marginal cost?
The relationship between the marginal cost and average cost is the same as that between any other marginal-average quantities. When marginal cost is less than average cost, average cost falls and when marginal cost is greater than average cost, average cost rises.
Why are there no fixed cost in the long run?
By definition, there are no fixed costs in the long run, because the long run is a sufficient period of time for all short-run fixed inputs to become variable. These costs and variable costs have to be taken into account when a firm wants to determine if they can enter a market.
When the average product is rising?
If marginal product is less than average product, then average product declines. If marginal product is greater than average product, then average product rises. If marginal product is equal to average product, then average product does not change.
What causes LAC to rise?
Why does LAC Rise Eventually: Diseconomies of Scale: So much for the downward sloping segment of the long-run average cost curve. As noted above, beyond a certain point the long-run average cost curve rises which means that the long-run average cost increases as output exceeds beyond a certain point.
Which cost Cannot measure?
Some opportunity costs cannot be measured in terms of money. For example, if you work fifty to sixty hours a week, year in and year out, forgoing the opportunity to take a daily walk and improve your health, can you measure the possible damage to your health by getting no exercise?
How is the slope of fixed cost curve?
The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity produced increases. AFC is equal to the vertical difference between ATC and AVC. Variable returns to scale explains why the other cost curves are U-shaped.
How do we measure economics?
The size of a nation’s overall economy is typically measured by its gross domestic product, or GDP, which is the value of all final goods and services produced within a country in a given year.
When production is zero total cost will be?
If the firm z facing constant marginal costs and marginal cost equals to zero then total cost will equal to fixed cost.
Can total fixed cost be zero?
True. Because total fixed cost exists even at zero level of output, whereas, total variable cost is zero at zero output.
Which cost is positive when output is zero?
Fixed costs are always shown as the vertical intercept of the total cost curve; they are the costs incurred when output is zero, so there are no variable costs.
When MR is zero What is TR?
When MR is zero, then TR is maximum. Marginal revenue is the rate of Total revenue. Beyond the point when MR=0, the TR starts falling as MR becomes negative beyond this point. Was this answer helpful?
When TR is rising MR will be?
As long as MR is positive, TR increases (or when TR rises, MR is positive). ADVERTISEMENTS: 2. When MR is zero, TR is at its maximum point (or when TR is maximum, MR is zero).
What happens when AR MR is zero?
When MR is zero, AR will be constant.
When MR is positive and constant TR is constant?
When MR is positive and constant, average and total revenue will both increase at constant rate. False; because when MR is positive and constant, AR will also be positive and constant. However, TR will increase at constant rate.
When TR is constant what will be its effect on AR?
Reason: In case of imperfect competition, when TR is constant, AR continues to fall and in case of perfect competition TR never becomes constant.