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The total cost curve, if non-linear, can represent increasing and diminishing marginal returns.. The short-run total cost (SRTC) and long-run total cost (LRTC) curves are increasing in the quantity of output produced because producing more output requires more labor usage in both the short and long runs, and because in the long run producing more output involves using more of the physical ...
In mathematics and economics, a corner solution is a special solution to an agent's maximization problem in which the quantity of one of the arguments in the maximized function is zero. In non-technical terms, a corner solution is when the chooser is either unwilling or unable to make a trade-off between goods.
In economics, a cost function represents the minimum cost of producing a quantity of some good. The long-run cost curve is a cost function that models this minimum cost over time, meaning inputs are not fixed. Using the long-run cost curve, firms can scale their means of production to reduce the costs of producing the good. [1]
1. The Average Fixed Cost curve (AFC) starts from a height and goes on declining continuously as production increases. 2. The Average Variable Cost curve, Average Cost curve and the Marginal Cost curve start from a height, reach the minimum points, then rise sharply and continuously. 3. The Average Fixed Cost curve approaches zero asymptotically.
The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to maximize social welfare (the sum of producer and consumer surplus) while earning enough revenue to cover its fixed costs.
The differentiation between long-run and short-run economic models did not come into practice until 1890, with Alfred Marshall's publication of his work Principles of Economics. However, there is no hard and fast definition as to what is classified as "long" or "short" and mostly relies on the economic perspective being taken.
An increase in fixed cost would cause the total cost curve to shift up rigidly by the amount of the change. [4] There would be no effect on the total revenue curve or the shape of the total cost curve. Consequently, the profit maximizing output would remain the same.
In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. The cost can comprise any of the factors of production (including labor, capital, or land) and taxation .