Question

2. The costs per unit in the short term should always be greater or equal than the costs per unit in the long term.

True or False

Answer 1

The statement is correct.

The long-run average total cost (LRATC) is a business metric that speaks to the average cost per unit of yield as time goes on, where all information sources are thought to be variable.

Long-term unit costs are quite often not as much as here and now unit costs on the grounds that in a long-term time period, organizations have the adaptability to change huge segments of their operations, for example, manufacturing plants, to accomplish optimal efficiency. An objective of both company administration and financial specialists is to decide the lower limits of LRATC.

For example, if a manufacturing company assembles another, bigger plant for production, it is expected that the LRATC per unit would in the long run progress toward becoming lower than at the old plant as the company exploits certain economies of scale.