Long-run average total cost (LRATC)

Long-run average total cost (LRATC),

Definition of Long-run average total cost (LRATC):

  1. The metric businesses use to signify the long-term average cost per unit of output when every input is deemed a variable. It is typically less than short-term unit costs because of the time it takes. Organizations aim for a lower LRATC.

  2. Long-term unit costs are almost always less than short-term unit costs because, in a long-term time frame, companies have the flexibility to change big components of their operations, such as factories, to achieve optimal efficiency. A goal of both company management and investors is to determine the lower bounds of LRATC.

  3. Long-run average total cost (LRATC) is a business metric that represents the average cost per unit of output over the long run, where all inputs are considered to be variable and the scale of production is changeable. The long-run average cost curve shows the lowest total cost to produce a given level of output in the long run.

How to use Long-run average total cost (LRATC) in a sentence?

  1. LRATC measures the average cost per unit of output over the long run.
  2. In long-term time frames, companies have more flexibility to change their operations.

Meaning of Long-run average total cost (LRATC) & Long-run average total cost (LRATC) Definition