Question

Explain LAC (Long run average cost curve).

Answer 1

Answer:

Explanation:

2, you can see that the LAC curve (long run average cost curve) is a U-shaped curve. This shape depends on the returns to scale. We know that, as a firm expands, the returns to scale increase. Falling long run average costs and increasing economies to scale due to internal and external economies of scale.

Answer 2

The long-run average cost is the cost that is calculated when the production factors are variable.

What is LAC?

• It is used to represent the productive efficiency improvement
• It is used in a business to get competition in the market
• In the long-run average cost, the profit is higher and the prices for consumers are lower
• It provides dividends for the shareholder of the business
• When the long-run average cost decreases then economies of scale get reduce
• All costs in long-run average cost are variable