How firms adjust every input to find their most efficient scale
In short: This video explains the long-run average total cost curve, a crucial concept for understanding how businesses manage costs when they have the flexibility to change every single input in their production process.
Unlike the short run, where some factors are fixed, the long run allows for complete flexibility in production scale.
Crucially, this curve acts as an envelope, surrounding all possible short-run average total cost curves. By understanding this relationship, students of microeconomics can better grasp how individual decision-makers, such as firms, navigate market structures and incentives to maximize profit.
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Sources
- Summary by Intellect · source: Long run average total cost curve | APⓇ Microeconomics | Khan Academy
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