The following figure plots Short Run Average Cost functions for small,medium,and large plants. Based on the figure and plots provided,for which quantity level is a medium plant the best choice?
A)Q₁
B)Q₂
C)Q₃
D)Q₄
E)Q₅

Question

The following figure plots Short Run Average Cost functions for small,medium,and large plants. Based on the figure and plots provided,for which quantity level is a medium plant the best choice? 
A)Q₁ 
B)Q₂ 
C)Q₃ 
D)Q₄ 
E)Q₅

Quizplus · Accepted Answer

A medium plant has the lowest Short Run Average Cost (SRAC) curve at Q2. At quantities less than Q2, the small plant has the lowest SRAC, and at quantities greater than Q2, the large plant has the lowest SRAC. Therefore, Q2 is the optimal output level for a medium plant.

The Following Figure Plots Short Run Average Cost Functions for Small,medium,and