Crawler Crane LR 1130 EN - bms.dkMenuItemByDocId...Crawler Crane LR 1130 LR 1002.03 EN
Topics Covered: Production in the LR Costs in the LR LRAC curves LRMC Curves The relationship...
-
Upload
sandra-hudson -
Category
Documents
-
view
217 -
download
0
Transcript of Topics Covered: Production in the LR Costs in the LR LRAC curves LRMC Curves The relationship...
Topics Covered:
• Production in the LR• Costs in the LR• LRAC curves• LRMC Curves• The relationship between SRAC and LRAC curves
Production in the Long runProduction in the Long runProduction in the Long runProduction in the Long run
• All factors variable in long runAll factors variable in long run
• The scale of production:The scale of production:
– constant returns to scaleconstant returns to scale
– increasing returns to scaleincreasing returns to scale
– decreasing returns to scaledecreasing returns to scale
• Economies of scaleEconomies of scale– specialisation & division of labourspecialisation & division of labour
– indivisibilitiesindivisibilities
– container principlecontainer principle
– greater efficiency of large machinesgreater efficiency of large machines
– by-productsby-products
– multi-stage productionmulti-stage production
– organisational & administrative economiesorganisational & administrative economies
– financial economiesfinancial economies
• Diseconomies of scaleDiseconomies of scale
Production in the Long runProduction in the Long runProduction in the Long runProduction in the Long run
• External economies and diseconomies of External economies and diseconomies of scalescale
• LocationLocation– balancing the distance from suppliers and balancing the distance from suppliers and
consumersconsumers– importance of transport costsimportance of transport costs
• Optimum combination of factorsOptimum combination of factorsMPPa/Pa = MPPb/Pb ... = MPPn/PnMPPa/Pa = MPPb/Pb ... = MPPn/Pn
• Decision making in different time periodsDecision making in different time periods– very short run, short run, long run and very very short run, short run, long run and very
long runlong run– decisions can be made for all time periods decisions can be made for all time periods at at
the same timethe same time
Production in the Long runProduction in the Long runProduction in the Long runProduction in the Long run
Costs in the Long runCosts in the Long runCosts in the Long runCosts in the Long run
• Long-run average costsLong-run average costs– shape of the shape of the LRACLRAC curve curve– assumptions behind the curveassumptions behind the curve
Alternative long-run average cost curvesAlternative long-run average cost curvesAlternative long-run average cost curvesAlternative long-run average cost curves
OutputO
Co
sts
(a)(a) Economies of scale Economies of scale
LRAC
OutputO
Co
sts
(b)(b) Diseconomies of scale Diseconomies of scale
LRAC
Alternative long-run average cost curvesAlternative long-run average cost curvesAlternative long-run average cost curvesAlternative long-run average cost curves
OutputO
Co
sts
(c)(c) Constant costs Constant costs
LRAC
Alternative long-run average cost curvesAlternative long-run average cost curvesAlternative long-run average cost curvesAlternative long-run average cost curves
A typical long-run average cost curveA typical long-run average cost curveA typical long-run average cost curveA typical long-run average cost curve
OutputO
Co
sts
LRAC
OutputO
Co
sts
LRACEconomiesof scale
Constantcosts
Diseconomiesof scale
A typical long-run average cost curveA typical long-run average cost curveA typical long-run average cost curveA typical long-run average cost curve
Costs in the Long runCosts in the Long runCosts in the Long runCosts in the Long run
• Long-run average costsLong-run average costs– shape of the shape of the LRACLRAC curve curve– assumptions behind the curveassumptions behind the curve
• Long-run marginal costsLong-run marginal costs
Long-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costs
OutputO
Co
sts
(a)(a) Economies of scale Economies of scale
LRAC
LRMC
OutputO
Co
sts
(b)(b) Diseconomies of scale Diseconomies of scale
LRAC
LRMC
Long-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costs
OutputO
Co
sts
(c)(c) Constant costs Constant costs
LRAC = LRMC
Long-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costs
OutputO
Co
sts
(d)(d) Initial economies of scale, then diseconomies of scale Initial economies of scale, then diseconomies of scale
LRMC
LRAC
Long-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costsLong-run average and marginal costs
Costs in the Long runCosts in the Long runCosts in the Long runCosts in the Long run
• Long-run average costsLong-run average costs– shape of the shape of the LRACLRAC curve curve– assumptions behind the curveassumptions behind the curve
• Long-run marginal costsLong-run marginal costs
• Relationship between long-run and short-Relationship between long-run and short-run average costsrun average costs– the envelope curvethe envelope curve
Deriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed size
SRAC1
Co
sts
OutputO
1 factory
Deriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed size
SRAC1
SRAC2
Co
sts
OutputO
2 factories
Deriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed size
SRAC1
SRAC3SRAC2
Co
sts
OutputO
3 factories
Deriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed size
SRAC1
SRAC3SRAC2
SRAC4
SRAC5
Co
sts
OutputO
5 factories
4 factories
Deriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed sizeDeriving long-run average cost curves: factories of fixed size
SRAC1
SRAC3SRAC2
SRAC4
SRAC5
LRAC
Co
sts
OutputO
Deriving a long-run average cost curve: choice of factory sizeDeriving a long-run average cost curve: choice of factory sizeDeriving a long-run average cost curve: choice of factory sizeDeriving a long-run average cost curve: choice of factory sizeC
ost
s
OutputO
Examples of short-runaverage cost curves
Deriving a long-run average cost curve: choice of factory sizeDeriving a long-run average cost curve: choice of factory sizeDeriving a long-run average cost curve: choice of factory sizeDeriving a long-run average cost curve: choice of factory size
LRAC
Co
sts
OutputO
Costs in the Long runCosts in the Long runCosts in the Long runCosts in the Long run
• Long-run average costsLong-run average costs– shape of the shape of the LRACLRAC curve curve– assumptions behind the curveassumptions behind the curve
• Long-run marginal costsLong-run marginal costs
• Relationship between long-run and short-Relationship between long-run and short-run average costsrun average costs– the envelope curvethe envelope curve
• Long-run cost curves in practiceLong-run cost curves in practice
Costs in the Long runCosts in the Long runCosts in the Long runCosts in the Long run
• Long-run average costsLong-run average costs– shape of the shape of the LRACLRAC curve curve– assumptions behind the curveassumptions behind the curve
• Long-run marginal costsLong-run marginal costs
• Relationship between long-run and short-Relationship between long-run and short-run average costsrun average costs– the envelope curvethe envelope curve
• Long-run cost curves in practiceLong-run cost curves in practice– the evidencethe evidence
Costs in the Long runCosts in the Long runCosts in the Long runCosts in the Long run
• Long-run average costsLong-run average costs– shape of the shape of the LRACLRAC curve curve– assumptions behind the curveassumptions behind the curve
• Long-run marginal costsLong-run marginal costs
• Relationship between long-run and short-Relationship between long-run and short-run average costsrun average costs– the envelope curvethe envelope curve
• Long-run cost curves in practiceLong-run cost curves in practice– the evidencethe evidence– minimum efficient plant sizeminimum efficient plant size