The long-run average cost (LRAC)curve shows
A)the lowest unit cost at which the firm can produce a given output.
B)the highest unit costs of producing a given output.
C)the operation of the law of diminishing returns.
D)what happens to the fixed costs in the long run.
E)the same as the short-run average cost curve.

Question

Quizplus · Accepted Answer

The LRAC curve shows the lowest average cost at which a firm can produce a given level of output in the long run, taking into account all adjustments to inputs and production processes. It is based on the assumption that all inputs are variable in the long run, and the firm is able to choose the most efficient production techniques. Therefore, the LRAC curve reflects the economies of scale and scope, and the impact of technical progress and learning effects on production costs.

The Long-Run Average Cost (LRAC)curve Shows