This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-5

-Refer to Figure 7-5. Which plant size is optimal for the firm to produce 1500 basketballs each week?
A) Plant 1
B) Plant 2
C) Plant 3
D) Plant 4

Question

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-5
 
-Refer to Figure 7-5. Which plant size is optimal for the firm to produce 1500 basketballs each week?
A) Plant 1 
B) Plant 2 
C) Plant 3 
D) Plant 4

Quizplus · Accepted Answer

The optimal plant size for producing 1500 basketballs each week would be the one that minimizes the average cost of production at that output level. Without the figure, we assume Plant 2 is the correct choice based on typical cost curves where the optimal plant size is the one that operates at the lowest point on the average cost curve for the given output.

This Figure Shows the Long-Run Average Total Cost Curve for a Firm