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PLANNING HORIZON: Another term for the long-run average cost curve. The long-run average cost curve is termed the planning horizon because it provides information a firm can use to plan factory construction and expansion in the long run.
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Lesson 15: Cost | Unit 4: Long-Run Cost
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Page: 21 of 24
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In this unit, you should have learned about:- The long run as a period in which all inputs are variable, meaning all costs are also variable.
- That in the long run a firm has the choice of capital or plant size.
- That in the long run a firm generally seeks the quantity of capital with the lowest short-run average total cost for the anticipated production level.
- The long-run average cost curve which is the envelope of short-run average total cost curves for different quantities of capital.
- That long-run average cost curve is U-shaped, with economies of scale responsible for the negative slope for small quantities of output and diseconomies of scale responsible for the positive slope for larger quantities of output.
- The minimum efficient scale, which is the quantity of output or range of output on the long-run average cost curve with the lowest average cost.
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AVERAGE FACTOR COST AND MARGINAL FACTOR COST A mathematical connection between average factor cost and marginal factor cost stating that the change in the average factor cost depends on a comparison between average factor cost and marginal factor cost. For perfect competition, with no market control, marginal factor cost is equal to average factor cost, and average factor cost does not change. For monopsony and other firms with market control, marginal factor cost is greater than average factor cost, and average factor cost rises.
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BLUE PLACIDOLA
[What's This?]
Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either a 50 foot extension cord or a combination CD player, clock radio, and telephone (with answering machine). Be on the lookout for cardboard boxes.
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This isn't me! What am I?
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It's estimated that the U.S. economy has about $20 million of counterfeit currency in circulation, less than 0.001 perecent of the total legal currency.
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"The greatest things ever done on Earth have been done little by little. " -- William Jennings Bryan
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ACIR
Advisory Council on Intergovernmental Relations
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