EOS – fall-in LRAC due to the fact production grows. It’s a long manage will set you back build. Happens when every enters try changeable. Disagree anywhere between opportunities.
Explain the difference in long run and you can short run. DR will cause MC to increase, and you will EOS will cause LRAC to-fall.
Achievement – relationships between MC and you can DR is clear and you can lead
MC are nevertheless straight down whenever LRAC because the LRAC try falling. This is actually the ‘laws of Mathematics’ – if the marginal is gloomier than just average, average often slip.
Matchmaking ranging from DR and you can EOS is reduced head and you can weakened, only they are both associated with costs. EOS and you can MC relationship – simply a mathematical style.
step 3 (a) A company inside the a perfectly aggressive markets and you can a firm with a monopoly each other attempt to increase the earnings. Establish, with the help of a diagram, why the degree from rate and you will returns will be some other when you look at the the two places.
(b) Speak about whether it is constantly true that a strong, in the place of maximising its payouts while you are kept quick, tend to attempt to expand in dimensions. a beneficial. Very well competitive market – assumptions –
Diagram to have short run. Continue Reading Experience of EOS and you will DR – a person is an extended run and also the most other a short-run design