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.Should this profit- maximizing firm ever consider moving from point E (output level Q3 on SRATC2)to point F (output level Q5 on SRATC3)?
A)Yes,because the firm can take advantage of economies of scale.
B)No,because they are already producing at their lowest possible cost at point E.
C)Yes,because SRATC3 is the optimal plant size for this firm.
D)Yes,if the product price rises enough to lead the firm to expand to plant size 3.
E)No,because producing at point F implies a higher cost per unit of output.

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.Should this profit- maximizing firm ever consider moving from point E (output level Q3 on SRATC2)to point F (output level Q5 on SRATC3)?
A)Yes,because the firm can take advantage of economies of scale. 
B)No,because they are already producing at their lowest possible cost at point E. 
C)Yes,because SRATC3 is the optimal plant size for this firm. 
D)Yes,if the product price rises enough to lead the firm to expand to plant size 3. 
E)No,because producing at point F implies a higher cost per unit of output.

Quizplus · Accepted Answer

If the product price rises enough, it may justify expanding to a larger plant size, even if it initially implies higher costs per unit.

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