Answer to Question #224947 in Microeconomics for darily

Question

The average total cost (ATC) curve of a business varies/curve with the time frame. Give some explainations and reasons for the difference between short and long-term ATC curves and how firms can be identified as economies of scale, constant returns of scale and diseconomies of scale.

Answer 1

The difference is that there are no fixed factors in the long run.In the long run firms can adjust their prices but in the short run they can only influence the prices through adapting

When a firm increases its level of output it experiences economies of scale.

Constant returns to scale occurs when a firm expands all inputs proportionately

Diseconomies of scale occurs when the long run average cost of producing output increases as outputs increases