Mini lessons / Microeconomics / 3.3
3.3 Long-run costs and economies of scale
Why can a giant bakery sell bread more cheaply than a corner shop, and why doesn't it just keep growing forever?
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In the long run, everything can change
In the long run a firm picks its size: how many ovens, how big a factory. Each plant size has its own short-run ATC curve. The long-run ATC (LRATC) traces the lowest cost of making each output when the firm can choose any size.