Which of the following would cause a firm's LRAC curve to shift up?
A)An increase in the amount of "learning by doing."
B)An increase in the price of labor, all else constant.
C)An increase in the amount of output produced by the firm.
D)A decrease in the amount of capital employed by the firm.

Question

Quizplus · Accepted Answer

An increase in the price of labor would increase the cost of production for the firm, leading to a higher LRAC curve. Options A and C would lead to a decrease in LRAC as the firm becomes more efficient with more experience and higher output. Option D would have an ambiguous effect on the LRAC curve as it depends on whether the decrease in capital leads to decreased efficiency or not.

Which of the Following Would Cause a Firm's LRAC Curve