A short-run average total cost curve and a long-run average cost curve are tangent
A)where the short-run cost curve is downward sloping.
B)where the short-run cost curve is upward sloping.
C)when the plant size is at the optimal level for that level of output.
D)where the short-run cost curve is downward sloping and the plant size is optimal.
E)by coincidence.

Question

Quizplus · Accepted Answer

In the long run, a firm can choose its plant size to optimize its cost of production for a given level of output. The point of tangency between the short-run average total cost curve and the long-run average cost curve occurs when the firm has chosen the optimal plant size for that level of output. Therefore, C is the best choice.

A Short-Run Average Total Cost Curve and a Long-Run Average