Which of the following statements most accurately makes the distinction between the long run and the very-long run with respect to the long-run average cost (LRAC)curve?
A)In the long run,the LRAC curve is shifting down,whereas in the very-long run the firm is moving along the existing LRAC curve.
B)In the long run,the firm is moving along the existing LRAC curve,whereas in the very-long run,the LRAC curve is shifting down.
C)In the long run,the LRAC curve is shifting up,whereas in the very-long run the firm is moving along the existing LRAC curve.
D)In the long run,the firm is moving along the existing LRAC curve,whereas in the very-long run,the LRAC curve is shifting up.
E)There is no distinction between the long run and the very-long run with respect to the LRAC curve.

Question

Quizplus · Accepted Answer

In the long run, the firm adjusts its inputs to achieve the minimum average cost for the given level of output, thus moving along the existing LRAC curve. In the very-long run, the firm has the flexibility to adjust its technology, and as a result, the LRAC curve shifts downwards, reflecting technological progress and improvements in efficiency. Therefore, option B accurately captures the distinction between the long run and the very-long run.

Which of the Following Statements Most Accurately Makes the Distinction