A short- run average total cost curve and a long- run average cost curve are tangent
A) where the short- run cost curve is downward sloping.
B) by coincidence.
C) where the short- run cost curve is upward sloping.
D) when the quantity of the fixed factor is at the optimal level for that level of output.
E) where the short- run cost curve is downward- sloping and the quantity of the fixed factor is optimal.

Question

Quizplus · Accepted Answer

The long-run average cost curve represents the lowest possible average cost for each level of output when all inputs can be adjusted. The short-run average total cost curve represents the average cost for each level of output when at least one input is fixed. The point of tangency between the short-run and long-run average cost curves occurs where the firm has chosen the optimal level of the fixed factor of production for that level of output. Therefore, the best choice is D.

A Short- Run Average Total Cost Curve and a Long-