AP Microeconomics / Unit 3: Production, Cost, and the Perfect Competition Model
3.3 Long-Run Production Costs
Notes
The long-run ATC curve shows:
- Economies of scale (LRATC falls as output grows).
- Constant returns to scale.
- Diseconomies of scale (LRATC rises).
- Minimum efficient scale: lowest output where LRATC is minimized.
Practice
A firm doubles all inputs and output more than doubles. This is:
Falling average cost.
Diseconomies of scale often come from:
Hard to manage.
Economies of scale are a long-run idea because:
Scale requires changing everything.
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