In addition to short-run total product and total cost curves, we derived a firm’s marginal product, average product, average total cost, average variable cost, average fixed cost, and marginal cost curves If the firm is to maximize profit in the long run, it must select the costminimizing combination of factors for its chosen level of output Thus, the firm must try to use factors of production in accordance with the marginal decision rule That is, it will use factors so that the ratio of marginal product to factor price is equal for all factors of production A firm’s long-run average cost (LRAC) curve includes a range of economies of scale, over which the curve slopes downward, and a range of diseconomies of scale, over which the curve slopes upward There may be an intervening range of output over which the firm experiences constant returns to scale; its LRAC curve will be horizontal over this range The size of operations necessary to reach the lowest point on the LRAC curve has a great deal to with determining the relative sizes of firms in an industry This chapter has focused on the nature of production processes and the costs associated with them These ideas will prove useful in understanding the behavior of firms and the decisions they make concerning supply of goods and services CONCEPT PROBLEMS Which of the following would be considered long-run choices? Which are short-run choices? A dentist hires a new part-time dental hygienist Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 455