of course that LRAC envelope various SRAC.
of course that LRAC envelope various SRAC.
Long run average cost curve is known as envelope curve because it is formed by enveloping the short run average cost curves and it helps the entrepreneur in long term planning that is why it is also called planning curve.
what is the relationship between long run average cost curve and short run average cost curve?
The long-run average cost curve is longer.
A firm's short run supply curve
the long run curve is at a minimum point
Long run average cost curve is known as envelope curve because it is formed by enveloping the short run average cost curves and it helps the entrepreneur in long term planning that is why it is also called planning curve.
Because it envelopes the Short Run Cost curves.
what is the relationship between long run average cost curve and short run average cost curve?
The long-run average cost curve is longer.
A firm's short run supply curve
A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve.
Height is an example of a normal curve. Most people will be around average height, with some being short or tall, and very few being very short or very tall.
The same as you would a short envelope.
The relationship between these two curves is that a long run average cost curve consists of several short run average cost curves, each of which refers to a particular scale of operation. both curves are u shaped the short run avg cost curve rising because of labour specialisation and better spreading of fixed costs and it rises due to the law of diniminshing returns. the long run avg cost curve falls because of economies of scale and rises because of dis-economies. the long run avg cost curve must comprise of all the lowest points of each of the short run avg cost curve because no firm will operate at a level of higher costs in the long run than in the short run. the long run avg cost curve must always be equal to or lie below any short run avg cost curve because in the long run all factors of production can be variable.
the long run curve is at a minimum point
The minimum is price=average cost below this price supply=0
Marginal cost curve above the average variable cost curve, is the same as the short run supply curve. In perfect competition, MC=Price. It follows that production will be at that point. Hence the supply curve is the same as that part of the MC curve which is above AVC, where the firm can cover its variable cost....this is better than shutting down.