 గ బిరకంటాభి వాస్చియాచారం నిలిలూటాయాచా. అందిస్ం అంది ఆది ంది ఆదాచిసికన నిస్ంకి . కరికి కికికి. In the previous video, we had discussed the necessary cost curves in the short run. In this video, we shall discuss the necessary and saves of the long run cost curves. The discussion of unit 8 and total cost of production and cost curves concludes with this video. We all know that long run is the period when a firm can sense its plant size and scale of organization. In the long run, all factors are variable. Now the question is how short is the short run and how long is the long run. This depends on the industry and the production techniques used. The period of length will vary from firm to firm. If there are no transactions and no special inputs, then all inputs can be quickly adjusted and the long run is not very long. Let us first discuss how the average cost curve is derived in the long run. We all know that a particular plant can produce a particular range of output. It is the lowest point of average cost curve beyond who is production is not economic because of operation of the law of diminishing returns which may occur for various reasons. Suppose the demand for a firm's product increases. Now the producer will install a new plant. The firm will be making use of the newly installed plant till it receives the lowest point on the average cost curve. This way more new plants will be installed with the increasing demand for the firm's product. Now we will derive the long run average cost curve LSE from the short run average cost curve by fitting a line which is tangent to all short run average cost curve that is SSE curves. The point of tangency must be the lowest point on the short run average cost curve because beyond that the firm will not produce in the plant. This we have shown in figure 8.4. In figure 8.4 LSE is the long run average cost curve. Each point on the LSE curve is a point of tangency with the corresponding short run average cost curve. Therefore this long run average cost curve is also called envelope curve. The firm will produce OM amount of output at the minimum point E on the LSE curve. If the firm produces less than OM, it is not reaping fully the economies of production and if the firm produces beyond OM, the firm profit will fall. In both the cases, the average cost of production will be higher. The learners, please note that in figure 8.4, the shape of the long run average cost is like U. This shape reflects the law of returns to scale. According to this law, the unit cost of production decreases as plant size increases due to the economies of scale which the larger plant size make possible. It has been assumed that this plant is completely inflexible. There is no reverse capacity, not even to meet the temporary rising demand. If this plant size increases further than this optimum size, there are these economies of scale. The turning up of the LSE curve is due to marginal diseconomies of scale when output is increased beyond the optimum size. The long run marginal cost can be derived from the short run marginal cost but it does not envelope them like the LSE curve. The long run marginal curve is formed from the point of intersection of the short run marginal curves with vertical lines to the x axis drawn from the points of tangency of the corresponding LSE curve and LSE curve. At the level of output, the LMC must be equal to SMC curve at which the corresponding LSE curve is tangent to the LSE curve. The shape of the long run marginal cost curve has been shown with the help of figure 8.5. Let us start with the point A which is a point of tangency between the LSE and the LSE curve. From this point, a vertical line A is drawn on the x axis and it cuts the SMC one at point P. Similarly, B and C are the other two points of tangency between the two SSE curves and LSE curve. Corresponding to these two points of tangency, the point of intersection between vertical lines B, B and C, C are Q and C. After joining P, Q and C, we get LMC curve. At this minimum point C, the LMC curve intersects the LSE curve. Long run marginal cost bears direct relationship with the long run average cost. And both LSE and LMC fall, LMC is lower than LSE. But LSE and LMC both increases, LMC is higher than LSE. But LMC cuts the LSE at the lowest point. The same relationship between LSE and LSE is true in the short run as well. So dear learners, this video as well as the discussion on unit 8 concludes with this. In the next video, we shall discuss unit 9 out of the first semester course in economic theory which is basically primarily focused on equilibrium of arms and industry. Thank you.