SR: time period when at least one input is fixed
LR: all inputs are variable
change in total costs when one more unit of output is produced
MC = ΔTC / ΔQ = ΔTVC / ΔQ
- implies the ΔTC = ΔT
- technology improvements
- changes in resources prices
- changes in business taxes
Note MC intersects AVC and ATC at their
Shifts in the SR costs curves: What will shift the SR cost curves
1. economies of scale
2. constant returns to scale
3. diseconomies of scale
- specialization of labor and managements
- efficient capital
- fixed cost of design and development
LRATC - region - economies of scale
LRATC - region - constant returns to sale
def: as production increases, cost per unit increases and so the LRATC is upward-sloping
1. cost for resources used in production where no monetary payment is made
2. the value of the firm's resources in their best alternative use
accounting profits