Final answer:
The smoothness of the LRATC curve results from constant returns to scale, which occurs when increasing all inputs in the production process does not significantly change the average cost, allowing firms of different sizes to coexist in the market.
Step-by-step explanation:
The smoothness of the long-run average-total-cost (LRATC) curve is significantly influenced by what is known as constant returns to scale. This concept relates to the middle section of the LRATC curve, where the average cost of production does not change noticeably with variations in scale after economies of scale have been fully utilized.
Essentially, at this point on the curve, referred to as Q3, increasing all inputs proportionately does not lead to any significant changes in the average cost of production.It is this range of the LRATC curve where firms can produce different quantities at the same average cost, which allows for the existence of firms of various sizes in the market.
This flat segment of the LRATC indicates that there isn't just one most efficient size for a firm; instead, firms can operate efficiently over a range of outputs, which plays a role in determining the number of firms that will compete in the market. Consequently, the shape of the LRATC can reveal much about market structure and firm size diversity.