A reduction in capital cost shifts the long-run average total cost curve down.

Question

Quizplus · Accepted Answer

A reduction in capital cost means that it costs less to produce the same output, which leads to a decrease in the long-run average total cost (LRATC) curve. This is because the LRATC curve represents the lowest possible average total cost for producing a certain output level, and reducing the cost of inputs (such as capital) lowers this minimum cost level.

A Reduction in Capital Cost Shifts the Long-Run Average Total