What is Long-run Average Cost Curve or Envelope Curve?

1.	What is Long-run Average Cost Curve or Envelope Curve?
Answer» Long-run average cost refers to the minimum possible per unit cost of producing different quantities of output in the long period. According to Mansfield, ” The long-run average cost curve is that curve which shows the minimum cost per unit of producing each output level corresponding to different scales of productivity.” It is determined by dividing long-run Total Cost by the quantity of output produced. It is the lowest average cost attainable when all inputs are variable; that is, when any plant size can be constructed.

Answer»

Long-run average cost refers to the minimum possible per unit cost of producing different quantities of output in the long period.

According to Mansfield, ” The long-run average cost curve is that curve which shows the minimum cost per unit of producing each output level corresponding to different scales of productivity.” It is determined by dividing long-run Total Cost by the quantity of output produced. It is the lowest average cost attainable when all inputs are variable; that is, when any plant size can be constructed.

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