The following graph shows the short-run average total cost curves and the long-run average cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average cost curve (LRAC); for example, Q1 marks the point of tangency between SRATC, and LRAC. The orange point on SRATC3 indicates the firm's current output level in the short run (Q3). SRATC, SRATC5 LRAC SRATC, SRATC3 SRATC4 QUANTITY OF OUTPUIT COST PER UNIT

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.