Microeconomics › Section G · Production, costs, and industry structure › Topic G.5
Costs in the long run and economies of scale
In the long run nothing is fixed, so the firm faces no inherited plant - it chooses one. The long-run average cost curve records, for every output, the cheapest plant available, and its U-shape answers a question the short run cannot even ask: how big should this firm be?
In this topic
- No fixed costs, all choices
- The long-run average cost curve
- Economies of scale
- Diseconomies of scale
- Worked example: LRAC across five plant sizes
- Minimum efficient scale and market structure
- Choosing a technology
- Worked example: two technologies, two volumes
- Short-run curves inside the long-run curve
- Common mistakes to avoid
- Key takeaways
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