What is meant by the term economic capacity?
A)An output level where the firm is physically unable to increase output.
B)The output level where average variable cost is at a minimum.
C)The output level where average total cost is at a minimum.
D)Total fixed costs are at a minimum.

Question

Quizplus · Accepted Answer

Economic capacity refers to the output level at which a firm operates with the minimum average total cost. At this level, the firm is operating efficiently and utilizing resources effectively. Option A is incorrect because a firm might choose not to increase output even when it is physically possible to do so. Option B refers to the output level where variable costs are at a minimum, not economic capacity. Option D is incorrect because fixed costs do not affect economic capacity.

What Is Meant by the Term Economic Capacity