Answer :

The long run marginal cost (LMC) curve and long range average cost (LAC) curves are U shaped curves but flatter than short run U shape, because of the law of returns to scale.

LAC.jpg


The important factors determining the shape of LAC and LMC are that whether there is increasing, constant, or decreasing returns to scale.


• At constant returns to scale AC will be same for all levels of output


• At increasing returns to scale the average cost with fall will fall with every unit of output


• At decreasing returns to scale the average cost will increase with every unit of output


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