Costs in the short and in the long run

The shape of the long run average-total-cost curve conveys important information about the production processes that a firm has available for manufacturing a good. When long run average total cost declines as output increases, there are said to be economies of scale. When long run average total cost rises as output increase, there are said to be diseconomies of scale. When long run average total cost does not vary with the level of output, there are said to be constant returns to scale.