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.
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
- 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
- Incremental Cost
- Marginal Input Cost
- Fixed and Variable Costs
- Diminishing Marginal Productivity
- Costs Relate to Diminishing Marginal Productivity
- Law of Diminishing Marginal Returns
- Average Total Cost
- 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
- Economies of Scale
- Diseconomies of Scale
- Minimum Efficient Scale
- Increasing, Constant, and Decreasing Returns to Scale
- 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
