Long Run Average Total Cost

Long run average total cost can be defined as an average cost per unit of output of a long term production unit. All the inputs associated with the long run average total cost are considered to be variable. When compared the long term unit costs are always less than the short term unit costs because in a long term time span the companies has a number of opportunities of reducing costs. For example in a long term project companies and business entities has a chance to change or alter the big components of operations or production to reduce the overall cost. For examples the companies can change the working of the factories in order to achieve efficiency and reduce overall cost. It is the goal of the business entities and the investors to determine or achieve low bounds of long run average total cost.

For example the case of long run average total cost can be explained or described by the case of a company that purchase a new and more productive production plant. By using this new and efficient production plant the cost per unit production can be decreased as compared to the cost associated with production by using the old production plant.

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