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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 27
Give an intuitive explanation for the following questions about Figure :
1. Why does SAC exceed AC for every level of output except q*?
2. Why does SMC exceed MC for output levels greater than q*?
3. What would happen to this figure if the firm increased its short-run level of capital beyond K*?
Figure Short-Run and Long-Run Average and Marginal Cost Curves at Optimal Output Level
When long-run average cost is U-shaped and reaches a minimum at q*, SAC and SMC will also pass through this point. For increases in output above q*, short-run costs are higher than long-run costs.
1. Why does SAC exceed AC for every level of output except q*?
2. Why does SMC exceed MC for output levels greater than q*?
3. What would happen to this figure if the firm increased its short-run level of capital beyond K*?
Figure Short-Run and Long-Run Average and Marginal Cost Curves at Optimal Output Level
When long-run average cost is U-shaped and reaches a minimum at q*, SAC and SMC will also pass through this point. For increases in output above q*, short-run costs are higher than long-run costs.
Explanation
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1. The SAC exceeds AC for every level of...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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