Principles of Microeconomics / Unit 6 MIC 0534 short lesson, about 20 seconds
Long-Run Average Cost
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The idea
The long-run average cost curve gives the lowest average cost of each output when every input, plant size included, is free: the lower envelope of the short-run curves.
In practice
A firm planning an output picks the plant whose curve is lowest there.
Where people slip
Short-run minima lie off the envelope except at its own minimum; a plant rarely runs at its cheapest point.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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