Briefly summarize the empirical literature on the long-run costs typic

Briefly summarize the empirical literature on the long-run costs typically incurred by firms in a variety of industries. In particular, is there reason to believe that firms’ long-run cost curves assume the typical U-shape? Why or why not?

What will be an ideal response?

ANSWER

The existing research provides evidence that firms reach the minimum efficient scale of operation at a relatively low level of output and that economies of scale up to that point are not overly large. In addition, the studies indicate that, for many industries the LRAC is relatively flat beyond the MES. Thus, the evidence does not tend to support the typical U-shaped long-run average cost curve.