Exhibit 7.4 -Refer to Exhibit 7.4,which shows short-run average cost curves.For output between q_a and q_b,when is average cost the lowest? A)when the plant is large B)when the plant is medium-size C)when the plant is small D)at an output level less than q E)at an output level more than q_b

Question

Quizplus · Accepted Answer

The minimum point of the short-run average cost curve is the point where the marginal cost curve intersects it. In this case, that point is closer to the U-shaped section of the curve, indicating that the plant should be a medium-size plant, not too small or too large, in order to achieve the lowest average cost at the given output levels. Therefore, choice B is the best option.

Exhibit 7.4 -Refer to Exhibit 7.4,which Shows Short-Run Average Cost Curves.For Output