Figure 8-2 LRAC and SRATC Curves
Each SRATC curve is tangent at some point to the LRAC curve. With
given technology, each plant size gives rise to a different SRATC curve.
The SRATC curve shown corresponds to the optimal plant size for
producing units of output because the average cost, is the lowest
attainable. For output levels less than or greater than such as or
the plant size embodied in is not optimal because the cost
given by the curve is greater than the minimum possible cost,
given by the LRAC curve. For example, if the firm wants to increase
production from to in the short run, its average total costs will rise
above the LRAC curve to point x. To achieve the minimum possible cost
of producing output in the long run, the firm must increase its plant
size. By doing so the firm moves to a different SRATC curve, one that is
tangent to the LRAC curve at output
Note that any individual SRATC curve is just one of many such curves,
each one corresponding to a different plant size. The single SRATC curve
in Figure 8-2 shows how costs vary as output is varied, holding the
plant size constant. Figure 8-3 shows a family of SRATC curves, along
with a single LRAC curve. The LRAC curve is sometimes called an
envelope curve because it encloses (or envelops) a series of SRATC cost
curves by being tangent to them.
Q 0 c 0 ,
Q 0 , Q 1
Q 2 , SRATC 0
SRATC 0
Q 0 Q 2
Q 2
Q 2.