interpretation is that one firm owns a single manufacturing plant that produces a quantity of 5,000, while

another firm owns four separate manufacturing plants, which each produce a quantity of 5,000. This second

explanation, based on the insight that a single firm may own a number of different manufacturing plants, is

especially useful in explaining why the long-run average cost curve often has a large flat segment—and thus

why a seemingly smaller firm may be able to compete quite well with a larger firm. At some point, however, the

task of coordinating and managing many different plants raises the cost of production sharply, and the long-

run average cost curve slopes up as a result.

In the examples to this point, the quantity demanded in the market is quite large (one million) compared with

the quantity produced at the bottom of the long-run average cost curve (5,000, 10,000 or 20,000). In such a
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