Long Run Average Cost (LRAC) - Explained
What is the Long Run Average Cost?
Written by Jason Gordon
Updated at March 26th, 2023
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What is the Long Run Average Cost?
The long-run average cost, is the cost that it costs (on average) to produce a single unit of output (at any given level of production).
Basically, it is the cost of producing a common-sized, batch of goods over time. This cost is then divided by the number of units in the batch to give the average cost per unit. This is the average cost of production per unit.
The long-run nature of the cost means that the cost of all production of the units is added up over a period of time. This is important, as the costs of production may vary more in the short run.
Back to:ECONOMIC ANALYSIS & MONETARY POLICY
Relate Topics
- Theory of the Firm
- Capital Formation
- Rent Seeking
- Structure Conduct Performance Model
- Integration
- Co-Insurance Effect
- Conglomerates
- Cost vs Profit Center
- Accelerator Theory
- Market Structure
- Fixed Cost vs Variable Cost
- Actual vs Implicit Costs
- Explicit Costs
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- Production Function
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