The long-run average cost of production is defined as
A) total cost divided by the quantity of output the firm chooses when at least one factor is fixed.
B) total cost divided by the quantity of output the firm chooses when it can choose a production facility of any size.
C) the quantity produced by a firm that can choose any size production facility.
D) the quantity produced by a firm when at least one factor is fixed.

Question

Quizplus · Accepted Answer

The long-run average cost of production is the average cost of producing each unit of output when the firm is free to vary all factors of production and choose the production facility of any size. It is calculated as total cost divided by the quantity of output for the most efficient production facility. Therefore, option B is the correct answer.

The Long-Run Average Cost of Production Is Defined as