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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 long-run average 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. For example, if this condition exists, doubling all 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 cost
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A cost that has already been incurred and is nonrecoverable. It should be ignored in a decision about future actions.
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