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Build your students' comprehension of long-run average total cost with this engaging and multi-faceted activity!
This activity includes:
1) This "Long-Run Average Total Cost" Activity includes 4 parts. It begins with a detailed flowchart that illustrates the process by which firms use short-run average total cost at various plant capacities to determine their long-run average total costs of production. Students will then have the opportunity to put principles into practice and graph a long-run ATC curve themselves. Using several short-run ATC curves provided, students will answer questions about the pattern of short-run average total costs as production increases, and then connect the curves together to graph a long-run ATC curve for the firm. Next, your class will define economies of scale, constant returns to scale, and diseconomies of scale. They'll then use a long-run ATC curve provided to identify each stage of returns to scale for a typical firm. Students will then use data provided to calculate the long-run average total cost per unit of output for a firm and then use the data they've collected to plot the per-unit production costs for the firm and draw the LRATC and MC curves on a frontier provided. Students will then shade in the areas of returns to scale and identify each on the graph they've created. Lastly, student will use data provided to calculate the average total cost and marginal cost per unit of output for a firm. Your class will then be required to use the data they've collected to answer questions about economies and diseconomies of scale, as well as economic profits and losses for the firm in the long-run.
This activity can be used in many different ways in the classroom. Students can work independently, in pairs or this activity can be used as a jigsaw in order to facilitate a class wide discussion about the topics discussed in the activity.
2) A detailed answer key to the lesson activity to save you time and help guide student comprehension.
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If you like this activity, check out our Unit Activity Bundle that includes activities for all of the objectives in this unit.
Best of all, this activity aligns to our "Unit 3.5 - Long-Run Average Total Cost" video lecture, which can be found here:
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