Knowledge About Economic Theory,Relationship Between Short-run and Long-run Cost Curves of Economic

Relationship between short-run and long-run cost curves of economic theory

For each quantity of output there is one costminimizing level of capital and a unique shortrun average cost curve associated with producing the given quantity. The following statements assume that the firm is using the optimal level of capital for the quantity produced. If not, then the SRAC curve would lie "wholly above" the LRAC and would not be tangent at any point.

Each STC curve can be tangent to the LRTC curve at only one point. The STC curve cannot cross (intersect) the LRTC curve.:230:228229 The STC curve can lie wholly above the LRTC curve with no tangency point.:256

One STC curve is tangent to LRTC at the longrun costminimizing level of production. At the point of tangency LRTC STC. At all other levels of production STC will exceed LRTC.:292299

Average cost functions are the total cost function divided by the level of output. Therefore, the SATC curve is also tangent to the LRATC curve at the cost-minimizing level of output. At the point of tangency LRATC SATC. At all other levels of production SATC > LRATC:292299 To the left of the point of tangency the firm is using too much capital and fixed costs are too high. To the right of the point of tangency the firm is using too little capital and diminishing returns to labor are causing costs to increase.

The slope of the total cost curves equals marginal cost. Therefore, when STC is tangent to LTC, SMC LRMC.

At the longrun costminimizing level of output LRTC STC; LRATC SATC and LRMC SMC,.:292299

The longrun costminimizing level of output may be different from the minimum SATC.:229:186

With fixed unit costs of inputs, if the production function has constant returns to scale, then at the minimal level of the SATC curve we have SATC LRATC SMC LRMC.:292299

With fixed unit costs of inputs, if the production function has increasing returns to scale, the minimum of the SATC curve is to the right of the point of tangency between the LRAC and the SATC curves.:292299 Where LRTC STC, LRATC SATC and LRMC SMC.

With fixed unit costs of inputs and decreasing returns the minimum of the SATC curve is to the left of the point of tangency between LRAC and SATC,:292299 where LRTC STC, LRATC SATC and LRMC SMC.

With fixed unit input costs, a firm that is experiencing increasing (decreasing) returns to scale and is producing at its minimum SAC can always reduce average cost in the long run by expanding (reducing) the use of the fixed input.:29299 :186

LRATC will always equal to or be less than SATC.:211

If production process is exhibiting constant returns to scale then minimum SRAC equals minimum long run average cost. The LRAC and SRAC intersect at their common minimum values. Thus under constant returns to scale SRMC LRMC LRAC SRAC .

If the production process is experiencing decreasing or increasing, minimum short run average cost does not equal minimum long run average cost. If increasing returns to scale exist long run minimum will occur at a lower level of output than SRAC. This is because there are economies of scale that have not been exploited so in the long run a firm could always produce a quantity at a price lower than minimum short run average cost simply by using a larger plant.

With decreasing returns, minimum SRAC occurs at a lower production level than minimum LRAC because a firm could reduce average costs by simply decreasing the size or its operations.

The minimum of a SRAC occurs when the slope is zero. Thus the points of tangency between the U-shaped LRAC curve and the minimum of the SRAC curve would coincide only with that portion of the LRAC curve exhibiting constant economies of scale. For increasing returns to scale the point of tangency between the LRAC and the SRAC would have to occur at a level of output below level associated with the minimum of the SRAC curve.

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Contemporary approaches of economic theory

During the 1960s there was a growth in the amount of social movement activity in both Europe and the United States. With this increase also came a change in the public perception around social movements. Protests were now seen as making politics better and essential for a healthy democracy. The classical approaches were not able to explain this increase in social movements. Because the core principle of these approaches was that protests were held by people who were suffering from structural weaknesses in society, it could not explain that the growth in social movement was preceded by a growth in welfare rather than a decline in welfare. Therefore, there was a need for new theoretical approaches.

Because of the fact that deprivation was not a viable explanation anymore, researchers needed to search for another explanation. The explanations that were developed were different in the United States than in Europe. The more American-centered structural approaches examined how characteristics of the social and political context enable or hinder protests. The more European-centered social-constructivist approaches rejected the notion that class-struggle is central to social movements, and emphasized other indicators of a collective identity, like gender, ethnicity or sexuality.

Structural approachesPolitical opportunity/political processCertain political contexts should be conducive (or representative) for potential social movement activity. These climates may disfavor specific social movements or general social movement activity; the climate may be signaled to potential activists and/or structurally allowing for the possibility of social movement activity (matters of legality); and the political opportunities may be realized through political concessions, social movement participation, or social movement organizational founding. Opportunities may include:

Increased access to political decision making power

Instability in the alignment of ruling elites (or conflict between elites)

Access to elite allies (who can then help a movement in its struggle)

Declining capacity and propensity of the state to repress dissentResource mobilizationSocial movements need organizations first and foremost. Organizations can acquire and then deploy resources to achieve their well-defined goals. To predict the likelihood that the preferences of a certain group in society will turn into protest, these theorists look at the pre-existing organization of this group. When the population related to a social movement is already highly organized, they are more likely to create organized forms of protest because a higher organization makes it easier to mobilize the necessary resources. Some versions of this theory state that movements operate similar to capitalist enterprises that make efficient use of available resources. Scholars have suggested a typology of five types of resources:

Material (money and physical capital);

Moral (solidarity, support for the movement's goals);

Social-Organizational (organizational strategies, social networks, bloc recruitment);

Human (volunteers, staff, leaders);

Cultural (prior activist experience, understanding of the issues, collective action know-how)Social movement impact theoryThis body of work focuses on assessing the impact that a social movement has on society, and what factors might have led to those impacts. The effects of a social movement can resonate on individuals, institutions, cultures, or political systems. While political impacts have been studied the most, effects on other levels can be at least as important. Because Impact Theory has many methodological issues, it is the least studied of the major branches of Social Movement Theory. Nevertheless, it has sparked debates on the efficacy of violence, the importance of elite and political allies, and the agency of popular movements in general.

Social-constructivist approachesNew social movementsThis European-influenced group of theories argue that movements today are categorically different from the ones in the past. Instead of labor movements engaged in class conflict, present-day movements (such as anti-war, environmental, civil rights, feminist, etc.) are engaged in social and political conflict (see Alain Touraine). The motivations for movement participation is a form of post-material politics and newly created identities, particularly those from the "new middle class". Also, see the work of Ronald Inglehart, Jrgen Habermas, Alberto Melucci, and Steve Buechler. This line of research has stimulated an enduring emphasis on identity even among prominent American scholars like Charles Tilly.

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