Which of the following statements concerning long- run and short- run cost curves is correct?
A) A short- run average cost curve can fall below the long- run average cost curve.
B) The short- run average cost curve is tangent to the long- run average cost curve for all levels of output of the fixed factor.
C) Both the long- run and short- run average cost curves show the lowest cost of producing any output when all factors are variable.
D) The long- run average cost curve envelops a whole family of short- run marginal cost curves.
E) The minimum point of the long- run average cost curve will correspond to the minimum point on a single short- run average cost curve.

Question

Quizplus · Accepted Answer

In the long run, firms can adjust all inputs, and the long-run average cost curve is derived from the lowest points of the short-run average cost curves. The minimum point of the long-run average cost curve corresponds to the minimum point on one of the short-run average cost curves, where the firm is operating at its most efficient scale.

Which of the Following Statements Concerning Long- Run and Short-