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Homework answers / question archive / Indicate whether each of the following involves an upward or downward shift in the long run average cost curve or instead, involves a leftward or rightward movement along a given curve
Indicate whether each of the following involves an upward or downward shift in the long run average cost curve or instead, involves a leftward or rightward movement along a given curve. Also indicate whether each will have an increasing, decreasing, or uncertain effect on the level of average cost:
A) A fall in the interest rates
Explanation:
A fall in interest rates leads to rise in unit cost of labor. This will also increment total cost for each level of output. Furthermore, when cost rises the given output average cost of production is also rises for each level of output. This will affect the Average total cost (ATC) curve upward.
B) An increase in learning experience
An increase in learning experience will rises the labor productivity. This will decline the cost of production because each unit of labor can produce more with efficiency. Hence, the each level of outcome can be produced with less labor than before which will shift both average and total cost curve down.
