Answer to Question #290561 in Microeconomics for Alig

Question

What do you mean by envelop curve.explain with the help of optimum plant size.

Answer 1

Solution:

An envelope curve is a curve that is tangential to each of a family of curves in a plane or, in three dimensions, a surface that is tangent to each of a family of surfaces at some point, with these points of tangency forming the entire envelope.

LAC is the envelope curve of SAC curves in the long run. Because it encompasses all short run average cost curves, the long-run average cost curve (LAC) is also known as the envelope curve. In other words, it encompasses the short run production points or production levels.

The optimum plant size diagram is as follows: