Question

Discuss the Long run cost curves with suitable diagram.

Answer 1

In the long run, all factors of production become variable. 1 he existing size of the firm can be increased. There are neither fixed inputs nor fixed costs in the long run.

LAC = LTC/Q
LAC – Long-run average cost LTC – Long-run total cost
Q – denotes the quantity of output.
The LAC curve is derived from short-run average cost curves. It is the locus of points denoting the least cost curve of producing the corresponding output.
The LAC curve is called as ‘Planning curve’ or ‘Envelope curve’