The long-run average total cost curve
A) is an envelope-shaped curve mapped out by the short-run average total cost curves for alternative plant sizes.
B) intersects the minimum point of each short-run average total cost curve for alternative plant sizes.
C) rises throughout its entire range when increasing returns are present.
D) falls throughout its entire range due to the law of diminishing returns.

Question

Quizplus · Accepted Answer

The long-run average total cost curve is an envelope-shaped curve that is derived from the short-run average total cost curves for different plant sizes, showing the lowest possible cost of production at each level of output when all inputs are variable.

The Long-Run Average Total Cost Curve