Refer to the long-run cost diagram for a firm. If the firm produces output Q ₂ at an average cost of ATC ₂, then the firm is
A)producing the profit-maximizing output but is failing to minimize production costs.
B)incurring X-inefficiency but is producing that output at which all existing economies of scale might be realized.
C)incurring X-inefficiency and is failing to produce the output at which all economies of scale might be realized.
D)producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Question

Refer to the long-run cost diagram for a firm. If the firm produces output Q ₂ at an average cost of ATC ₂, then the firm is
A)producing the profit-maximizing output but is failing to minimize production costs. 
B)incurring X-inefficiency but is producing that output at which all existing economies of scale might be realized. 
C)incurring X-inefficiency and is failing to produce the output at which all economies of scale might be realized. 
D)producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Quizplus · Accepted Answer

The Answer of  Refer to the long-run cost diagram for a firm. If the firm produces output Q ₂ at an average cost of ATC ₂, then the firm is
A)producing the profit-maximizing output but is failing to minimize production costs. 
B)incurring X-inefficiency but is producing that output at which all existing economies of scale might be realized. 
C)incurring X-inefficiency and is failing to produce the output at which all economies of scale might be realized. 
D)producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Refer to the Long-Run Cost Diagram for a Firm