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Lecture Comments (34)

1 answer

Last reply by: Professor Jibin Park
Mon Jan 12, 2015 5:19 PM

Post by Michael You on January 4, 2015

Now I thought there are no fixed cost in the long run. If there are no fixed costs, why is the definition for long run "average total cost when fixed cost has been chosen to minimize average total cost for each level of output?

1 answer

Last reply by: Professor Jibin Park
Tue Nov 4, 2014 6:39 PM

Post by Nick Cadogan on November 4, 2014

is the red ATC curve at 28:20 a short run curve?

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 6:59 PM

Post by Rebecca Dai on November 2, 2014

Does the 2014-15 new version of 5 steps a lot different from 2012 version?

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:08 AM

Post by Rebecca Dai on November 1, 2014

Hi Mr. Park, these questions are essential to my understanding of the courses but you haven't answered them for 3 days. Could you please answer them? Thank you very much!

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:09 AM

Post by Rebecca Dai on October 30, 2014

In the last example, what if the change in demand is permanent?

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:10 AM

Post by Rebecca Dai on October 30, 2014

Theoretically, what does ATC and LRATC tell us?

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:10 AM

Post by Rebecca Dai on October 30, 2014

In the last example, shouldn't the graph that is before 15000 flat instead of parabola?

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:11 AM

Post by Rebecca Dai on October 30, 2014

You said we should have higher fixed cost in longrun but in summary part you said the definition of LRATC is ATC when fixed cost is minimized. Don't they contradict each other?

3 answers

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 6:58 PM

Post by Rebecca Dai on October 30, 2014

Why isn't there fixed cost in longrun?

5 answers

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 7:34 PM

Post by Rebecca Dai on October 30, 2014

What the ordinate of your graph? You just put a $ there and what does that mean?

And I don't see how network externalitier affect producers and LRATC and I think it only brings convenience to users.

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:12 AM

Post by Rebecca Dai on October 30, 2014

And how do we change the graph of short run ATC? It just changes when we want to? And no matter how we change short run graph, its vertex is not the vertex of LRATC. If so, how do we minimize our cost in this way?

1 answer

Last reply by: Professor Jibin Park
Sun Nov 2, 2014 12:13 AM

Post by Rebecca Dai on October 30, 2014

Why is LRATC a parabola? Shouldn't it keep decreasing theoretically?  

1 answer

Last reply by: Professor Jibin Park
Thu Feb 27, 2014 12:28 AM

Post by Mengyao Zhang on February 24, 2014

FC does not relate to the output. How does it be minimized in the long run .

1 answer

Last reply by: Professor Jibin Park
Thu Feb 27, 2014 12:28 AM

Post by Mengyao Zhang on February 24, 2014

why does not ATC6 coincide with the LRATC?   ATC6 plans to have minimal ATC at 6 and LRATC gets at the same point.

Long-Run Costs & Economies of Scale

  • Businesses face both short-run and long-run costs.
  • Ignore sunk costs.
  • Firms choose higher or lower fixed costs depending on level of output.
  • Firms operate with economies of scale on the downward-sloping portion of the ATC.
  • Firms operate with diseconomies of scale on the upward-sloping portion of the ATC.
  • An ATC curve looks like a smile.
  • An AVC curve looks like a smirk.
  • A marginal cost curve resembles a Nike sign (Just Do It)!
  • The distance between the ATC and AVC is the AFC, or AFC + AVC = ATC

Long-Run Costs & Economies of Scale

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:10
  • II. Product Markets 1:10
  • Short-Run vs. Long-Run Costs 1:46
    • Business Decisions
    • High Fixed Cost
    • Low Fixed Cost
    • Example
  • Short-Run and Long Run ATC Curves 8:25
  • Returns to Scale 13:25
    • Economies of Scale
    • Diseconomies of Scale
  • Sources of Economies of Scale 16:18
    • Increased Specialization That Larger Output Levels Allow
    • Large Initial Set-Up Cost
    • Network Externalities
  • Sunk Cost 19:05
    • Definition of Sunk Cost
    • Example
  • Fill in the Following Cost Table 22:02
  • Short-Run vs. Long-Run Example 26:43