If a competitive firm is producing to the left of the minimum point of its long- run average cost curve, then
A) it can reduce its unit costs by building a larger plant.
B) its profits will decrease if it builds a larger plant.
C) it should shut down.
D) it cannot be producing its present output efficiently.
E) it can still be in long- run equilibrium as long as P = SRATC.

Question

Quizplus · Accepted Answer

The firm can reduce its unit costs by building a larger plant because it is operating at a scale where increasing production will lower average costs, indicating economies of scale.

If a Competitive Firm Is Producing to the Left of the Minimum