by firms making 20,000 each). The producers in this market will range in size from firms that make 5,000

units to firms that make 20,000 units. However, firms that produce below 5,000 units or more than 20,000 will

be unable to compete, because their average costs will be too high. Thus, if we see an industry where almost all

plants are the same size, it is likely that the long-run average cost curve has a unique bottom point as in Figure

7.11 (a). However, if the long-run average cost curve has a wide flat bottom like Figure 7.11 (b), then firms of a

variety of different sizes will be able to compete with each other.

We can interpret the flat section of the long-run average cost curve in Figure 7.11 (b) in two different ways. One

interpretation is that a single manufacturing plant producing a quantity of 5,000 has the same average costs as
a single manufacturing plant with four times as much capacity that produces a quantity of 20,000. The other
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