Skip to main content
Back

Average Total Cost: Short Run and Long Run definitions

Control buttons has been changed to "navigation" mode.
1/14
  • Short Run
    A period where some production inputs remain fixed, limiting a firm's ability to fully adjust output or costs.
  • Long Run
    A timeframe in which all production inputs become variable, allowing firms to alter factory size and reevaluate decisions.
  • Fixed Costs
    Expenses that do not change with output in the short run, such as leases or factory investments.
  • Variable Costs
    Expenses that change with the level of output, becoming the only type of cost in the long run.
  • Average Total Cost
    The total cost per unit of output, combining both fixed and variable costs, depicted as a curve on cost graphs.
  • Short Run Average Total Cost Curve
    A graphical representation showing how per-unit costs change with output when some inputs are fixed.
  • Long Run Average Total Cost Curve
    A curve tracing the lowest possible per-unit cost for each output level when all inputs are variable.
  • Economies of Scale
    Cost advantages achieved as output increases, often due to bulk purchasing, specialization, or large machinery.
  • Constant Returns to Scale
    A range where increasing output does not affect per-unit costs, resulting in a flat section on the cost curve.
  • Diseconomies of Scale
    Rising per-unit costs at high output levels, often caused by management or coordination challenges in large firms.
  • Specialization
    Efficiency gains from assigning specific tasks to workers, leading to lower costs at certain output levels.
  • Minimum Efficient Scale
    The smallest output level where all possible economies of scale are realized and per-unit costs stop decreasing.
  • Management Coordination
    The process of organizing resources and personnel, which can become complex and costly as firm size increases.
  • Plant Size
    The scale or capacity of a firm's production facility, adjustable only in the long run.