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F. Derive long run total cost curve.

Deriving the Long Run Total Cost Curve

The long run total cost curve (LRTC) shows the relationship between total cost (TC) and output (Q). It is derived from the long run average cost (LRAC) curve, which is derived from the long run marginal cost (LRMC) curve. It is important to understand the concepts of long run average cost (LRAC) and long run marginal cost (LRMC) so that a firm can determine the most efficient and cost-effective production level.

Long Run Average Cost Curve

The long run average cost (LRAC) curve shows the relationship between the long run average cost (LRAC) and output (Q). This curve is derived from the long run marginal cost (LRMC) curve which shows the relationship between the long run marginal cost (LRMC) and output (Q). The LRAC curve is U-shaped, meaning that the LRAC is initially high and then decreases with increasing output. Eventually, the LRAC reaches a minimum point and then begins to rise again as output increases.

Long Run Marginal Cost Curve

The long run marginal cost (LRMC) curve shows the relationship between the long run marginal cost (LRMC) and output (Q). The LRMC is the additional cost associated with producing one more unit of output. The LRMC curve is U-shaped, meaning that the LRMC is initially high and then decreases with increasing output. Eventually, the LRMC reaches a minimum point and then begins to rise again as output increases.

Derivation of Long Run Total Cost Curve

The long run total cost (LRTC) curve is derived from the long run average cost (LRAC) and long run marginal cost (LRMC) curves. The LRTC curve is derived by adding the LRAC and LRMC curves together. The LRTC curve is also U-shaped, meaning that the LRTC is initially high and then decreases with increasing output. Eventually, the LRTC reaches a minimum point and then begins to rise again as output increases.

Related Questions

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Suppose 20 households in a community have the demand function Q = 2 – 0.001P each for streetlights while 5 other households have the demand function Q = 3 – 0.002P each for streetlights. Here, Q refers to the number of streetlights to erect near their home while P is the unit price of each streetlight. The cost of building each streetlight is GHS 45. a) Assuming each household is making its separate purchase decision, find the market demand function for streetlights for all 25 households b) Assuming each household is making its separate purchase decision, find the equilibrium price and number of streetlights in the community c) Assuming a community association has decided to coordinate this streetlight purchase decision problem. The community leader uses the demand functions to determine how much each household is willing to contribute (willingness to pay) towards the first, second, third, etc streetlight. The first light is purchased only when the sum of individual households’ contributions is at least equal to the marginal cost of streetlights. Find out how many streetlights are purchased for this community in equilibrium.

Suppose 20 households in a community have the demand function Q = 2 – 0.001P each for streetlights while 5 other households have the demand function Q = 3 – 0.002P each for streetlights. Here, Q refers to the number of streetlights to erect near their home while P is the unit price of each streetlight. The cost of building each streetlight is GHS 45. a) Assuming each household is making its separate purchase decision, find the market demand function for streetlights for all 25 households b) Assuming each household is making its separate purchase decision, find the equilibrium price and number of streetlights in the community c) Assuming a community association has decided to coordinate this streetlight purchase decision problem. The community leader uses the demand functions to determine how much each household is willing to contribute (willingness to pay) towards the first, second, third, etc streetlight. The first light is purchased only when the sum of individual households’ contributions is at least equal to the marginal cost of streetlights. Find out how many streetlights are purchased for this community in equilibrium. Explain your answers in details

Suppose 20 households in a community have the demand function Q = 2 – 0.001P each for streetlights while 5 other households have the demand function Q = 3 – 0.002P each for streetlights. Here, Q refers to the number of streetlights to erect near their home while P is the unit price of each streetlight. The cost of building each streetlight is GHS 45. a) Assuming each household is making its separate purchase decision, find the market demand function for streetlights for all 25 households b) Assuming each household is making its separate purchase decision, find the equilibrium price and number of streetlights in the community c) Assuming a community association has decided to coordinate this streetlight purchase decision problem. The community leader uses the demand functions to determine how much each household is willing to contribute (willingness to pay) towards the first, second, third, etc streetlight. The first light is purchased only when the sum of individual households’ contributions is at least equal to the marginal cost of streetlights. Find out how many streetlights are purchased for this community in equilibrium.

The daily demand function for a product is given by Q=1,010−2P , where Q stands for the quantity demanded, and P stands for the price.

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