Long-run average cost curve (LAC) – Curve relating average cost of production to output when all inputs, including capital, are variable.
Short-run average cost curve (SAC) – Curve relating average cost of production to output when level of capital is fixed.
Long-run marginal cost curve (LMC) – Curve showing the change in long-run total cost as output is increased incrementally by 1 unit.
LMC<LAC then LAC will fall
LMC>LAC then LAC will rise
LMC=LAC then min. of LAC
Economies of scale – Situation in which output can be doubled for less than a doubling cost.
Diseconomies of scale – Situation in which a doubling of output requires more than a doubling cost.
