Cost is stable in economics is possible in long run cost curve. The question is how cost is stable inlong run? They are some factors which change the variable cost into fixed cost. The factors areinterest rate, inflation rate, and many more. Here we define you how cost is stable in long run costcurve.
Now that we have demonstrated how a manager can find the cost-minimizing input combinationwhen more than one input is variable, we can derive the cost curves facing a manager in the longrun. The structure of long-run cost curves is determined by the structure of long-run production, asreflected in the expansion path.
Derivation of Cost Schedules from a Production Function:
We begin our discussion with a situation in which the price of labor (w) is $5 per unit and the price of
capital (r) is $10 per unit. Figure 9.7 shows a portion of the firm’s expansion path. Isoquants Q1, Q2,
and Q3 are associated, respectively, with 100, 200, and 300 units of output.For the given set of input prices, the isocost curve with intercepts of 12 units of capital and 24 unitsof labor, which clearly has a slope of -5/10 (=-w/r), shows the least-cost method of producing 100units of output: Use 10 units of labor and 7 units of capital. If the firm wants to produce 100 units, itspends $50 ($5 * 10) on labor and $70 ($10 * 7) on capital, giving it a total cost of $120.