In the long run, a profit- maximizing firm produces any given level of output by choosing the production method that
A) equates the average cost per unit of all factors.
B) equates the marginal product of all factors.
C) produces that output at the lowest possible cost.
D) is associated with a flat total cost curve.
E) maximizes the marginal product of all factors.

Question

Quizplus · Accepted Answer

In the long run, a profit-maximizing firm wants to produce the given level of output at the lowest possible cost. Thus, the firm will choose the production method that minimizes the long-run average total cost (LRATC) curve. This is achieved by equating the marginal product of all factors of production with their corresponding prices. Therefore, choice C is the correct answer.

In the Long Run, a Profit- Maximizing Firm Produces Any