AP Microeconomics Flashcards: Long-Run Production Costs
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Review key ideas with interactive flashcards. This set includes 11 cards to help you master important concepts.
If a car manufacturer doubles all of its inputs (labor, capital, materials) and its output of cars more than doubles, what is it experiencing?
The manufacturer is experiencing increasing returns to scale, which corresponds to the economies of scale portion of its long-run average total cost curve.
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If a car manufacturer doubles all of its inputs (labor, capital, materials) and its output of cars more than doubles, what is it experiencing?
The manufacturer is experiencing increasing returns to scale, which corresponds to the economies of scale portion of its long-run average total cost curve.
What are the three types of returns to scale that describe the relationship between inputs and outputs in the long run?
The relationship between inputs and outputs in the long run is described by increasing, decreasing, or constant returns to scale.
What is the relationship between the scale of production and long-run average total cost (LRATC)?
The LRATC is characterized by the scale of production; it exhibits economies of scale as output rises, then may have constant returns to scale, and finally diseconomies of scale at high output levels.
What is meant by "constant returns to scale" or "efficient scale"?
Constant returns to scale occur when a firm's long-run average total cost remains constant as the scale of production changes.
What is the minimum efficient scale (MES)?
The minimum efficient scale is the lowest level of output at which a firm's long-run average total cost is minimized.
Why are there no fixed costs in the long run?
In the long run, a firm can adjust all inputs, such as factory size or machinery leases, meaning no costs are fixed and all costs are considered variable.
What are diseconomies of scale?
Diseconomies of scale occur when a firm's long-run average total cost increases as the scale of production increases.
What is the key characteristic of the "long run" in production?
In the long run, firms can adjust all of their inputs, which results in all production costs becoming variable.
How does the minimum efficient scale (MES) affect market structure?
The MES helps determine the concentration of firms in a market; a large MES relative to market demand can lead to a market with a few large firms (an oligopoly or monopoly).
A firm's long-run average total cost curve is U-shaped. Which part of the curve represents diseconomies of scale?
The upward-sloping portion of the U-shaped long-run average total cost curve represents diseconomies of scale, where costs per unit rise as output increases.
What are economies of scale?
Economies of scale occur when a firm's long-run average total cost decreases as the scale of production increases.