Generally speaking,the inclusion of transportation costs in the total costs of production has the effect of causing the LRAC curve to:
A)shift down.
B)flatten out.
C)shift up.
D)become steeper over the range on economies of scale.

Question

Quizplus · Accepted Answer

Including transportation costs means that the firm's total costs of production will increase, which will cause the LRAC curve to shift up. This is because the LRAC curve reflects the minimum average cost of production for a given level of output, and if costs go up, the minimum average cost will also increase. This is distinct from shifts in the LRAC curve due to economies of scale which can cause the curve to either shift down (due to increasing returns to scale) or become steeper (due to decreasing returns to scale).

Generally Speaking,the Inclusion of Transportation Costs in the Total Costs