Answer to Question #212809 in Economics of Enterprise for umair

Question

Suppose that a firm wants to enter in the market where there is only one firm of that product and they are supplying the entire market at declining region of average costs curve. What do you suggest to the new entrant about the conditions of old firm and potential of entrance?

Answer 1

The long-run average cost curve shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology.