Question

Can you assess the shape of the long-run average cost curve for your school? What do you think the curve looks like for a high school and why?

Answer 1

Ans) Long run average cost curve of school according to the traditional theory of microeconomic is U shape. As it will first increase and the point will come when the cost is minimum at this point school management is working profitably. As the cost has been decrease due to diminishing return to scale as the cost of fixed factor is fixed and the variable cost is decreasing by giving admission to one more student, this will reduce the cost of hiring teacher as well. At the minimum point the cost is minimum and the profit is maximum. But after this point the cost will rise, for eg if school is going to give more admission to student then this point their cost will increase as they have to employ more teacher the strength of the school have to be increase so the infrastructure will be renovate this is the eg of increase in coat beyond this point. So the long run average cost is "U" shape curve.