Total cost divided by the quantity of output the firm chooses when it can choose a production facility of any size describes
A) the short-run average cost of production.
B) the long-run average cost of production.
C) the short-run marginal cost of production.
D) the long-run marginal cost of production.

Question

Quizplus · Accepted Answer

The total cost divided by the quantity of output the firm chooses when it can choose a production facility of any size describes the long-run average cost of production. In the long run, the firm can adjust all its inputs and choose its production facility's size, which affects its average cost of production. Therefore, it is the long-run average cost of production that is being calculated here.

Total Cost Divided by the Quantity of Output the Firm