Microeconomics,, 16th Canadian Edition

change technologies in the very long run as described in the latter part of this chapter. ...

8.1 The Long Run: No Fixed Factors In the short run, when at least one factor is fixed, the only way to adjust output is to adju ...

crates per day, doing so with two machines and eight workers is technically efficient, but so is using four machines and two wor ...

If it is possible to substitute one factor for another to keep output constant while reducing total cost, the firm is currently ...

is 20 units of output and the price of one unit of labour is $2. Then we have Thus, the last dollar spent on capital adds only 4 ...

Oil is a very important input in many industries. Increases in the price of oil will lead profit-maximizing firms to substitute ...

compares to the cost of an additional unit of labour. If the two sides of Equation 8-2 are the same, then the firm cannot make a ...

Methods of production will change if the relative prices of factors change. Relatively more of the cheaper factor and relatively ...

these countries are inefficient because they are using methods long ago discarded in the West is missing the truth about efficie ...

Our final example involves a cross-country comparison of how firms substitute between capital and electricity. In North America, ...

Figure 8-1 A “Saucer-Shaped” Long-Run Average Cost Curve Long-Run Cost Curves We have been discussing a firm’s cost-minimizing c ...

The long-run average cost (LRAC) curve is the boundary between attainable and unattainable levels of costs. If the firm wants to ...

AVC, AFC, and ATC, as we did in the short run; in the long run, there is only one LRAC for any given set of input prices. The Sh ...

equipment is useful only when the volume of output that the firm can sell justifies using that equipment. For example, assembly ...

Such diseconomies may be associated with the difficulties of managing and controlling an enterprise as its size increases. At fi ...

returns. In the short run, at least one factor is fixed, and the law of diminishing returns ensures that returns to the variable ...

Figure 8-2 LRAC and SRATC Curves Each SRATC curve is tangent at some point to the LRAC curve. With given technology, each plant ...

Figure 8-3 The Relationship Between the LRAC Curve and the SRATC Curves To every point on the LRAC curve, there is an associated ...

Lessons From History 8-1 Jacob Viner and the Clever Draftsman Jacob Viner (1892–1970) was born in Montreal and studied economics ...

craftsman and to follow my instructions, absurd though they might be.” Viner’s mistake was to require that the draftsman connect ...