Exhibit 7-9 If the firm represented in Exhibit 7-9 wants to produce output level q, then in the long run it should build a plant size with average total cost curve of
A)1
B)2
C)3
D)4
E)the question cannot be answered with the information given

Question

Exhibit 7-9  If the firm represented in Exhibit 7-9 wants to produce output level q, then in the long run it should build a plant size with average total cost curve of
A)1 
B)2 
C)3 
D)4 
E)the question cannot be answered with the information given

Quizplus · Accepted Answer

In the long run, a firm should choose the plant size that corresponds to the minimum point on its long-run average total cost curve. In Exhibit 7-9, the minimum point on the LTAC curve is at plant size "2", which corresponds to an average total cost of approximately $10. Therefore, if the firm wants to produce output level q, it should build a plant size with an average total cost curve of "2".

Exhibit 7-9 If the Firm Represented in Exhibit 7-9