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    short run Average Cost curve

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    I need the following three questions answered. Please try to associate each scenario with real-world examples.

    1. Explain what could cause a shift in the short run Average Cost curve from SAC1 to SAC3. Does this scenario apply to products made by your firm?

    Figure 1: short run average cost curves

    2. Discuss the differences in following three Long Run Average Cost Curves (LRAC). Use the appropriate economic terminology. What is the shape of your company's present LRAC? LRAC? Explain.

    Figure 2: long run average cost curves

    3. What policies could cause the shift from A to B. Which curve has the largest income inequality?
    Describe income redistribution programs in your state.

    Figure 3: lorenz curves

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    Solution Preview

    1. it is the change in technology that causes a shift in the short run Average Cost curve from SAC (1) to SAC(3). For instance, using a new technology harvester decreases the cost of harvesting wheat. This scenario applies to the products made in my company. In my company the extrusion process is used to make plastic strapping. A new computer controlled extrusion machine almost doubled the capacity of each extrusion line. This scenario was similar to the one shown in Figure 1.

    2. The long run average cost curve shown in the first diagram ...

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