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Econ II Chapter 7 Notes.docx
Chapter 7 text book notes including highlighted terms and definitions. - Vis...
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CONCEPT OF COSTIN LONG RUN ANDENVELOPE CURVE
ECONOMIC
CONCEPT OF COST
•
The economic concept of cost is based onthe opportunity cost concept.
•
OPPORTUNITY COST
: It captures costas the worth of the goods or services thathave been forgone in order to have any good or service.
•
NORMAL PROFITS
is the opportunity cost of the entrepreneur’s entrepreneurialskills and is as much an item of cost as wages or interest.
•
Long run costs
•
In the long run, all inputs to a firm’s productionmay be changed. Hence,
There are no fixed inputs.
No fixed costs
.
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All costs of production are variable
. There arethree concepts of costs in the long run
1.Long run Total Cost (LRTC)2.Long run Average Cost (LRAC)3.Long run Marginal Cost (LRMC)
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Concept of Cost in Long Run and Envelope
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