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Long-Run Average Total Cost Curve
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shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output
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Economies of Scale
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when average long-run total cost declines as output increases
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Increasing Returns to Scale
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when output increases more than in proportion to an increase in all inputs (doubling inputs would cause output to more than double)
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Diseconomies of Scale
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when long-run average total cost increases as output increases
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Decreasing Returns to Scale
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when output increases less than in proportion to an increase in all inputs
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Constant Returns to Scale
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when output increases directly in proportion to an increase in all inputs
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Sunk Costs
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a cost that has already been incurred and is nonrecoverable; should be ignored in a decision about future actions
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