Which of the following statements is true?
A)SRTC exceeds LRTC.
B)For any specified output level, LRAC never exceeds SRAC.
C)SRAC exceeds LRTC.
D)SRMC exceeds LRMC.

Question

Quizplus · Accepted Answer

LRAC (long run average cost) is the average cost of production when all inputs are variable, and SRAC (short run average cost) is the average cost of production in the short run when at least one input is fixed. Since in the long run all inputs are variable, LRAC will always equal or be lower than SRAC for any given output level. Therefore, option B is true. The other options are false statements.

Which of the Following Statements Is True