Which of the following is an accurate statement about the envelope relationship?
A) At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is lower than long-run average cost.
B) At the planned output level, short-run average total cost equals long-run average cost, but at all other output levels, short-run average total cost is higher than long-run average cost.
C) The long-run average cost curve touches the minimum point of each short-run average total cost curve.
D) The long-run average cost curve is identical to the lowest short-run average cost curve.

Question

Quizplus · Accepted Answer

In the envelope relationship, the long-run average cost curve is tangent to the short-run average total cost curves at the planned output level, meaning they are equal at that point. At other output levels, the short-run average total cost is typically higher due to less flexibility in adjusting all inputs.

Which of the Following Is an Accurate Statement About the Envelope