中级微观课件·范里安版第20章讲义幻灯片.ppt

Average Total Production Costs For positive output levels y, a firm’s average total cost of producing y units is Returns-to-Scale and Av. Total Costs The returns-to-scale properties of a firm’s technology determine how average production costs change with output level. Our firm is presently producing y’ output units. How does the firm’s average production cost change if it instead produces 2y’ units of output? Constant Returns-to-Scale and Average Total Costs If a firm’s technology exhibits constant returns-to-scale then doubling its output level from y’ to 2y’ requires doubling all input levels. Total production cost doubles. Average production cost does not change. Decreasing Returns-to-Scale and Average Total Costs If a firm’s technology exhibits decreasing returns-to-scale then doubling its output level from y’ to 2y’ requires more than doubling all input levels. Total production cost more than doubles. Average production cost increases. Increasing Returns-to-Scale and Average Total Costs If a firm’s technology exhibits increasing returns-to-scale then doubling its output level from y’ to 2y’ requires less than doubling all input levels. Total production cost less than doubles. Average production cost decreases. Returns-to-Scale and Av. Total Costs y $/output unit constant r.t.s. decreasing r.t.s. increasing r.t.s. AC(y) Returns-to-Scale and Total Costs What does this imply for the shapes of total cost functions? Returns-to-Scale and Total Costs y $ c(y) y’ 2y’ c(y’) c(2y’) Slope = c(2y’)/2y’ = AC(2y’). Slope = c(y’)/y’ = AC(y’). Av. cost increases with y if the firm’stechnology exhibits decreasing r.t.s. Returns-to-Scale and Total Costs y $ c(y) y’ 2y’ c(y’) c(2y’) Slope = c(2y’)/2y’ = AC(2y’). Slope = c(y’)/y’ = AC(y’). Av. cost decreases with y if the firm’stechnology exhibits increasing r.t.s. Returns-to-Scale and Total Costs y $ c(y) y’ 2y’ c(y’) c(2y’) =2c(y’) Slope = c(2y’)/2y’ = 2c(y’)/2y’