The long run is a period of time in which anything within a firm's production can be varied. Fixed costs do not exist or affect the long run at all, any variable can be changed. To draw a long run production possibility curve, you "evelope" the bottom of all possible short run ATC curves. The optimal spending for society would be at the very bottom of the curve. When a firm is approaching but not yet reached the bottom it is called economies of scale, but if a company has passed the optimal point and it costs more to keep producing larger amounts of goods, its called diseconomies of scale.
Long Run Production Curve
Long Run Production Curve

The thick red line on the bottom of the graph is the Long Run Avereage Total Cost graph, it envelopes all the multi colored short run ATC curves and is labled with the varies econmies of scale.


Sample Problem:

True or False: The more a firm can produce the better.


False, it is possible for a company to produce too much of its products, it can be in the diseconomies of scale were each