The firm whose short-run cost curves are given in Exhibi has a long-run fixed cost of

Question

Quizplus · Accepted Answer

In the long run, fixed costs can be fully adjusted, which means they become irrelevant in the decision-making process. Therefore, the firm should only consider the variable costs (i.e. the short-run cost curves) when deciding how much to produce in the long run. Since the minimum point of the average variable cost curve occurs at a quantity of 2, the firm should produce 2 units in the long run, regardless of the fixed cost. Therefore, the choice of fixed cost does not affect the firm's optimal output level.

The Firm Whose Short-Run Cost Curves Are Given in Exhibi