In the long-run, a firm’s cost of production are shown by the long-run average cost curve.

1) What forces explain the typical shape of the long-run average cost curve?

2) How are the law of diminishing returns and diseconomies of scale different?

3) How is the shape of the long-run average cost curve related to what the firms in an industry will look like: will there be lots of firms or just a few, or perhaps even just one? Will all the firms be about the same size or will firms of different size coexist? (How do you know?)