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Technology Shifts the Long-Run Average Cost Curve

How do Technology Shifts affect the Long-Run Average Cost Curve?

Written by Jason Gordon

Updated at March 26th, 2023

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How do Technology Shifts affect the Long-Run Average Cost Curve?

New developments in production technology can shift the long-run average cost curve in ways that can alter the size distribution of firms in an industry.

New production technologies do not inevitably lead to a greater average size for firms. On one side, the new technology may make it easier for small firms to reach out beyond their local geographic area and find customers across a state, or the nation, or even across international boundaries. This factor might seem to predict a future with a larger number of small competitors. 

On the other side, perhaps the new information and communications technology will create “winner-take-all” markets where one large company will tend to command a large share of total sales.

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Relate Topics

  • Theory of the Firm
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  • 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
  • True Cost Economics
  • Accounting Profit
  • Economic Profit
  • What are Factors of Production?
  • Factor Income
  • Production Function
  • Fixed and Variable Inputs
  • Short-Run and Long-Run Production
  • Short Run
  • Total Product
  • Marginal Product
  • Value of Marginal Product
  • Law of Marginal Diminishing Product
  • Production Function
  • Production Possibilities Frontier
  • Capital 
  • Labor Theory of Value
  • How the Production Function Estimates Inputs
  • Factor Payment
  • Economic Rent
  • Cost Function
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  • Diminishing Marginal Productivity
  • Costs Relate to Diminishing Marginal Productivity
  • Law of Diminishing Marginal Returns
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  • Average Variable Cost
  • Marginal Cost
  • Average Profit or Profit Margin
  • Accounting Profit
  • Economic Profit
  • Normal Profit
  • Short and Long-Run Production
  • Cost Curves
  • Long-Run Average Cost (LRAC)
  • Production Technologies
  • Economies of Scope
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  • Shape of the Average Long-Run and Short-Run Cost Curves
  • Returns to Scale
  • Diseconomies of Scale
  • Long-Run Average Cost Curve Affect Industry Competitors
  • Technology Shifts the Long-Run Average Cost Curve
  • Law of Diminishing Marginal Returns
costs technology technology shifts long-run average cost curve lrac

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