LINK IT UP

Visit this website (http://openstax.org/l/Toobig) to read an article about the complexity of the belief that banks

can be “too-big-to-fail.”

The Size and Number of Firms in an Industry

The shape of the long-run average cost curve has implications for how many firms will compete in an industry,

and whether the firms in an industry have many different sizes, or tend to be the same size. For example, say

that the appliance industry sells one million dishwashers every year at a price of $500 each and the long-run

average cost curve for dishwashers is in Figure 7.11 (a). In Figure 7.11 (a), the lowest point of the LRAC curve

occurs at a quantity of 10,000 produced. Thus, the market for dishwashers will consist of 100 different

manufacturing plants of this same size. If some firms built a plant that produced 5,000 dishwashers per year

or 25,000 dishwashers per year, the average costs of production at such plants would be well above $500, and
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