The figure below shows a family of cost curves for a firm.The subscripts 1,2,and 3 for the SRATC curves refer to different plant sizes.
FIGURE 8- 3
-Refer to Figure 8- 3.If this firm is producing at point B,then
A)this firm is experiencing decreasing returns to scale.
B)it should employ more of its variable factors of production.
C)plant size 1 is optimal.
D)this firm is producing a level of output that is technically inefficient in the long run.
E)this firm could produce the same level of output at a lower cost with plant size 2.

Question

The figure below shows a family of cost curves for a firm.The subscripts 1,2,and 3 for the SRATC curves refer to different plant sizes.
  FIGURE 8- 3
-Refer to Figure 8- 3.If this firm is producing at point B,then
A)this firm is experiencing decreasing returns to scale. 
B)it should employ more of its variable factors of production. 
C)plant size 1 is optimal. 
D)this firm is producing a level of output that is technically inefficient in the long run. 
E)this firm could produce the same level of output at a lower cost with plant size 2.

Quizplus · Accepted Answer

If the firm is producing at point B, it indicates that it could produce the same level of output at a lower cost with plant size 2, suggesting that plant size 1 is not cost-efficient for the given output level.

The Figure Below Shows a Family of Cost Curves for a Firm.The