(Figure: Long-Run and Short-Run Average Cost Curves)Use Figure: Long-Run and Short-Run Average Cost Curves.If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run,the firm should build the plant associated with: Ref 11-18 Figure: Long-Run and Short-Run Average Cost Curves A)ATC₁. B)ATC₂. C)ATC₃. D)ATC₁ or ATC₂.

Question

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The firm should choose the plant associated with point B on the long-run average total cost curve because it corresponds to the minimum efficient scale of production for producing 100,000 units of the good in the long run. At this point, the firm is able to produce at the lowest possible cost per unit, and building a larger plant beyond this point would lead to increasing returns to scale and lower costs per unit. Points A and C correspond to smaller and larger plant sizes, respectively, where the firm would face higher costs per unit.