The long-run average-cost curve shows how the average cost of production varies when the firm is perfectly flexible in choosing its inputs.

Question

Quizplus · Accepted Answer

The long-run average-cost curve is also known as the "planning curve" and shows the lowest average cost at which a firm can produce any given level of output in the long run when all inputs are variable. This means that the firm is perfectly flexible in choosing its inputs, hence the statement is true.

The Long-Run Average-Cost Curve Shows How the Average Cost of Production