What Does Long-Run Average Total Cost – LRATC Mean?
A business metric that represents the average cost per unit of output over the long run, where all inputs are considered to be variable. 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.
