Explanation Of Shape Of Long Run Average Cost Curve
Economics notes
Explanation Of Shape Of Long Run Average Cost Curve
➡️ The long run cost function is a representation of the total cost of production over a long period of time. It takes into account all the costs associated with production, including fixed costs, variable costs, and economies of scale.
➡️ The long run cost function is used to determine the optimal level of production for a given level of output. It can also be used to compare the cost of production between different firms.
➡️ The long run cost function is an important tool for businesses to use when making decisions about production and pricing. It can help them determine the most cost-effective way to produce a given level of output.
What is the shape of the long run average cost curve?
The long run average cost curve is typically U-shaped, meaning that it starts off high, then decreases as production increases, and then increases again as production continues to increase. This is because of the economies of scale that can be achieved when production is increased, which leads to lower costs per unit.
What factors influence the shape of the long run average cost curve?
The shape of the long run average cost curve is influenced by a variety of factors, including the availability of resources, the technology used in production, the size of the firm, and the level of competition in the market.
How does the long run average cost curve differ from the short run average cost curve?
The long run average cost curve is U-shaped, while the short run average cost curve is typically downward sloping. This is because in the long run, firms have more time to adjust their production processes and take advantage of economies of scale, while in the short run, they are limited by the resources and technology available to them.