Question

What is a long-run average cost curve?

Short answer

The sum of many short run average cost curves is the long run average cost curve.

Step-by-step solution

Step 1. Introduction

The long run is defined as a time span during which all production parameters, referred to as inputs, are variable and businesses have enough leverage to enter and depart any market or industry.

Step 2. Explanation

The long run is defined as a time span during which all production parameters, referred to as inputs, are variable and businesses have enough leverage to enter and depart any market or industry.

The long run average cost curve of a firm illustrates the minimum average total cost at which a firm may achieve a certain amount of production in the long run when all inputs are variable.

With the help of the diagram below, this is explained:

The sum of many short run average cost curves is the long run average cost curve.