Long run average costs (LRAC) – In the long run all production costs are variable there
are no fixed factors. Fixed factors do not exist, becau the long time allows for all input quantities to change (Tucker). Firms can adjust their factors in the long run so that they can produce at a lower average cost. The long run average cost curve is called the planning curve, becau of the modifications a firm makes to lower costs in the long run.
学龄前期Short run average costs (SRAC) – In the short run, costs include the sum of fixed and variable costs. Fixed costs are costs that do not vary with output, while variable costs do vary with each unit of output. Variable costs can be changed, while fixed costs are “stuck” with current inputs (Baye).
Figure 1 – Short vs. Long Run Curves
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Example #3: Suppo each of the SRAC curves in the figure above reprents small, medium, and large building choices for Deli-mart. In the long run, you may choo anyone of the buildings for your Deli-mart operation, becau this curve reprents the lowest cost per unit in which Deli-mart can produce any number of sandwiches after you build any of the three buildings. Since, you are just starting out and do not have any prior deli experience you might choo the smaller building at SRACs for a lower cost per unit. A few years later, you may choo a larger building at SRACL从头开始的网名.
Average variable cost – Is the total variable cost divided by the quantity of output produced (TVC/Q). In figure 3 below, this average variable cost curve forms a u-shape. At the average variable cost’s minimum, you will e the marginal cost curve intercting. Where marginal cost is below AVC, AVC is falling. When marginal cost is above AVC, AVC is rising (Arnold). Average total cost equals the sum of the average fixed costs and the average variable costs. In the figure below, you will e that as the average variable costs ri the average total cost gets clor and clor. In the long run AVC and ATC end up merging, becau AFC do not exist.
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Example #4: Look at the table below; here you can e Deli-mart’s calculation of averag
e variable cost at the given quantities of output. When producing 200 sandwiches a month Deli-mart’s average cost is $2.20 per sandwich. You will find this by taking the variable cost of $440 and dividing it by the quantity of output of 200.
徐州周边旅游景点大全Table 1
Quantity | Fixed Cost | Variable Cost | Total Cost | Average Variable Cost |
100 | $1800 | $260 | $2060 | $2.60 |
200 | $1800 | $440 | $2240 | $2.20 |
300 | $1800 | $600 | $2400 | $2.00 |
400 | $1800 | $800 | $2600 | 官方购物网站正品 $2.00 |
| | | | |
Calculation:
=(Q) =(FC) =(VC) =(b+2Q) =VC/Q
Marginal cost – Is the cost incurred from the product on of an additional unit of output (incremental cost). Marginal cost can be calculated by the change in cost from the additional unit of output divided by the change in quantity from the additional unit of output (=∆TC /后花庭∆Q). Marginal costs are associated with a specific output change (Koch). Initially, marginal cost output falls, levels out at a minimum, and then ris thus forming a j-shape (As shown below in figure 4) (Tucker). In the Science of Success, Charles Koch explains that most decisions should be made off of marginal analysis between costs and benefits. If a business can make decisions on the appropriate margins, it is more likely to eliminate waste.
