A short-run average total cost curve will touch the long-run average cost curve at a level of output only
A)where the short-run cost curve is downward sloping.
B)where the short-run cost curve is upward sloping.
C)when the quantity of the fixed factor being employed is at the optimal level for that level of output.
D)where the short-run cost curve is downward-sloping and the quantity of the fixed factor is optimal.
E)by coincidence.

Question

Quizplus · Accepted Answer

The long-run average cost curve represents the lowest possible cost of producing each level of output given the most efficient combination of all factors of production. In order for the short-run average total cost curve to touch the long-run average cost curve at a point, the quantity of the fixed factor being employed must be at the optimal level for that level of output. This means that the short-run cost curve must be at its minimum point at that level of output, indicating that the combination of variable inputs and fixed inputs is most efficient for that level of output. Therefore, the correct answer is C.

A Short-Run Average Total Cost Curve Will Touch the Long-Run