Figure 8-11
Figure 8-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 8-11.In the short run,if the firm sells fewer than 5,000 picture frames per month

Question

Figure 8-11
  Figure 8-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 8-11.In the short run,if the firm sells fewer than 5,000 picture frames per month

Quizplus · Accepted Answer

In the short run, the firm should produce with the scale of operation associated with ATCₐ because it has the lowest average total cost at quantities produced below 5,000. ATCb and ATCc have higher average total costs, so producing with those scales of operation would lead to higher costs for the firm. Similarly, producing at a scale larger than ATCₐ would also lead to higher costs due to diseconomies of scale.

Figure 8-11 Figure 8-11 Illustrates the Long-Run Average Cost Curve