Long-run Marginal Cost Curve (LRMC)
The long-run marginal cost curve shows for each unit of output the added total cost incurred in the long run, that is, the conceptual period when all factors of production are variable so as minimize long-run average total cost. Stated otherwise, LRMC is the minimum increase in total cost associated with an increase of one unit of output when all inputs are variable.
The long-run marginal cost curve is shaped by economies and diseconomies of scale, a long-run concept, rather than the law of diminishing marginal returns, which is a short-run concept. The long-run marginal cost curve tends to be flatter than its short-run counterpart due to increased input flexibility as to cost minimization. The long-run marginal cost curve intersects the long-run average cost curve at the minimum point of the latter. When long-run marginal costs are below long-run average costs, long-run average costs are falling (as to additional units of output). When long-run marginal costs are above long run average costs, average costs are rising. Long-run marginal cost equals short run marginal-cost at the least-long-run-average-cost level of production. LRMC is the slope of the LR total-cost function.
Read more about this topic: Cost Curve
Famous quotes containing the words long-run, marginal, cost and/or curve:
“In the long-run every Government is the exact symbol of its People, with their wisdom and unwisdom; we have to say, Like People like Government.”
—Thomas Carlyle (1795–1881)
“In realms of knowledge, we bequeath our books,
And woe pursue who to a master quotes
The funnier of our witty marginal notes.”
—Philip Larkin (1922–1986)
“One must always be aware, to notice—even though the cost of noticing is to become responsible.”
—Thylias Moss, African American poet. As quoted in the Wall Street Journal (May 12, 1994)
“The years-heired feature that can
In curve and voice and eye
Despise the human span
Of durance—that is I;
The eternal thing in man,
That heeds no call to die.”
—Thomas Hardy (1840–1928)