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Breaking even
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The situation in which a firm is earning exactly a normal rate of return
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Constant returns to scale
answer
An increase in a firm's scale of production has no effect on costs per unit produced
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Diseconomies of scale
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An increase in a firm's scale of production leads to higher costs per unit produced
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Economies of scale
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An increase in a firm's scale of production leads to lower costs per unit produced
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Long-run average cost curve (LRAC)
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The "envelope" of a series of short-run cost curves
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Long-run competitive equilibrium
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When P = SRMC = SRAC = LRAC and profits are zero
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Minimum efficient scale (MES)
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The smallest size at which the long-run average cost curve is at its minimum
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Optimal scale of plant
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The scale of plant that minimizes average cost
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Short-run industry supply curve
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The sum of the marginal cost curves (above AVC) of all the firms in an industry
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Shutdown point
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The lowest point on the average variable cost curve. When price falls below the minimum point on AVC total revenue is insufficient to cover variable costs and bear losses equal to fixed costs
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P = SRMC = SRAC = LRAC
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Long-run competitive equilibrium
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