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    Recently being doing some work on this..

    I understand the concept of the LRAC curve itself, with economies and diseconomies of scale causing it's shape, however do not understand what all the SRAC curves represent and why they are there.

    Would just like some help clearing this up.. thanks.
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    Hi there,

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    (Original post by luke5675)
    Recently being doing some work on this..

    I understand the concept of the LRAC curve itself, with economies and diseconomies of scale causing it's shape, however do not understand what all the SRAC curves represent and why they are there.

    Would just like some help clearing this up.. thanks.
    Basically the same argument, except in the short-run one or more factors of production are fixed. In the long run, we look at economies and diseconomies of scale assuming the factors of production are used together in the optimal ratio (e.g. 1 computer to each worker).

    If we fixed capital but could vary labour, we'd see greater diminishing marginal returns, since we can hire more workers but we couldn't supply them with computers.
 
 
 
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