what is long run average total cost lratc 
long run average total cost lratc is a business metric that represents the average cost per unit of output over the long run where all inputs are considered to be variable and the scale of production is changeable the long run average cost curve shows the lowest total cost to produce a given level of output in the long run long term unit costs are almost always less than short term unit costs because in a long term time frame companies have the flexibility to change big components of their operations such as factories to achieve optimal efficiency a goal of both company management and investors is to determine the lower bounds of lratc understanding long run average total costfor instance if a manufacturing company builds a new larger plant for production it is assumed that the lratc per unit would eventually become lower than at the old plant as the company takes advantage of certain economies of scale or the cost advantages that come from expanding the scale of production when the scale of production is expanded average costs are reduced production becomes more efficient and a company can become more competitive in the market this can lead to both lower prices and larger profits which can be beneficial for both consumers and producers this is known as a positive sum game 