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Production Function – Estimate of Inputs

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How Does the Production Function Estimate Inputs? We’ve explained that a firm’s total costs depend on the quantities of inputs the firm uses to produce its output and the cost of those inputs to the firm. The firm’s production function tells us how much output the...

Short-Run Cost Decision – Perfectly Competitive Market

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How are Short-Run Decisions Based Upon Costs made in a Perfectly Competitive Market? The average cost and average variable cost curves divide the marginal cost curve into three segments. At the market price, which the perfectly competitive firm accepts as given, the...

Marginal Costs and the Supply Curve -Perfectively Competitive Firm

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What do Marginal Costs and the Supply Curve look like for a Perfectively Competitive Firm? For a perfectly competitive firm, the marginal cost curve is identical to the firm’s supply curve starting from the minimum point on the average variable cost curve. To...

Long Run Average Cost and Industry Competitors

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does the Long-Run Average Cost Curve Affect Industry Competitors? The shape of the long-run average cost curve affects  the size and number of firms that will compete in an industry. Where the LRAC curve has a flat-bottomed area of constant returns to scale....

Technology Shifts the Long-Run Average Cost Curve

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How do Technology Shifts affect the Long-Run Average Cost Curve? New developments in production technology can shift the long-run average cost curve in ways that can alter the size distribution of firms in an industry. New production technologies do not inevitably...
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