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There are a number of external factors which may affect a firm's LAC (Long run average) cost. Some of these factors include improved transport facilities, access to cheaper power and infrastructure, and increased government regulation.
Where a firm needs to achieve a large scale level of production before it can minimise costs is known as economies of scale. Economies of scale reflect the advantage for a firm which are experiences as a firm increases its level of output. Economies of scale are reached when average cost per unit of production fall as the size of output grows. Average cost is the per unit cost of production, obtained by dividing the total cost of producing a certain level of output by the quantity of total output...
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Common topics in this essay:
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