If a firm is producing the level of output at which short-run average cost equals long-run average cost,then
A)the firm has chosen the cost-minimizing combination of inputs to produce this level of output.
B)with a fixed amount of capital,short-run average cost is greater than long-run average cost at any other level of output.
C)the firm has chosen the profit-maximizing level of output.
D)both a and b
E)all of the above

Question

Quizplus · Accepted Answer

When a firm's short-run average cost equals its long-run average cost, it indicates that the firm has chosen the cost-minimizing combination of inputs (A) and, given the fixed amount of capital in the short run, the short-run average cost would be greater than the long-run average cost at any other level of output (B). This does not necessarily mean the firm has chosen the profit-maximizing level of output (C), as profit maximization also depends on factors like market demand and price.

If a Firm Is Producing the Level of Output at Which