-Refer to Figure 7 -5. Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄. Now, following a permanent change in demand, it plans to cut production to Q_cunits. What will happen to its average cost of production? A) In the short run, its average cost falls from US$47 to US$37, and in the long run, average cost rises to US$41. B) In the short run, its average cost rises from US$47 to US$55, and in the long run, average cost falls to US$37. C) In the short run, its average cost falls from US$47 to US$41, and in the long run, average cost falls even further to US$37. D) In the short run, its average cost rises from US$47 to US$55, and in the long run, average cost falls to US$41.

Question

Quizplus · Accepted Answer

The Answer of -Refer to Figure 7 -5. Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄. Now, following a permanent change in demand, it plans to cut production to Q_cunits. What will happen to its average cost of production? A) In the short run, its average cost falls from US$47 to US$37, and in the long run, average cost rises to US$41. B) In the short run, its average cost rises from US$47 to US$55, and in the long run, average cost falls to US$37. C) In the short run, its average cost falls from US$47 to US$41, and in the long run, average cost falls even further to US$37. D) In the short run, its average cost rises from US$47 to US$55, and in the long run, average cost falls to US$41.