The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves.

-Refer to the figure above.If this firm is producing at point B,we could say that it ________.

Question

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves.
 
-Refer to the figure above.If this firm is producing at point B,we could say that it ________.

Quizplus · Accepted Answer

At point B, the short-run average total cost curve is tangent to the long-run average total cost curve, meaning that the firm is producing at its minimum short-run average total cost for the quantity Q₁. However, this does not necessarily mean that the firm is maximizing profits. To maximize profits, the firm would need to take into account the price of the good it is producing and adjust its output accordingly. Moving to point A would not necessarily lower costs, as the short-run average total cost curve is higher at point A than at point B, and moving to point E would not necessarily minimize total costs, as it is below the long-run average total cost curve and therefore not efficient in the long run.

The Following Figure Depicts a Firm's Long-Run Average Total Cost