Title

(6) The Link Between Short and Long Run Cost

Topic Category

Cost

Publication Date

2011

Keywords

Short Run Cost, Long Run Cost, Planning Curve, Operating Decisions, Planning Decisions, Long Run Average Total Cost, Menu of Choices, Envelope Curve

Abstract

This explains the connection between the Short Run Average Total Cost Curves and the Long Run Average Total Cost Curve. The distinction between operating and planning decisions is established, as is the fact that every Short Run Average Total Cost Curve is based on some given level of fixed inputs. The Long Run Average Total Cost Curve is shown to be a collection of the "better spots" on a collection of Short Run Average Total Cost Curves, one for each level of assumed fixed inputs.

Run Time

10:22

Primary Discipline

Microeconomics

Skills Delivered

Ability to explain the difference between the Short Run and the Long Run Average Total Cost Curve. Ability to recognize and construct a graph showing the linkage between the Short and Long Run Average Cost Curves.

Rigor Level

2000

Prerequisites

Previous Cost Videos

Share

COinS