Exhibit 7.5

-Refer to Exhibit 7.5,which shows four short-run average cost curves for different possible plant sizes.If the firm represented in the figure above wants to produce output level q,then,in the long run,it should build a plant size with an average total cost curve of _____

Question

Exhibit 7.5
 
-Refer to Exhibit 7.5,which shows four short-run average cost curves for different possible plant sizes.If the firm represented in the figure above wants to produce output level q,then,in the long run,it should build a plant size with an average total cost curve of _____

Quizplus · Accepted Answer

To minimize long-run average total costs for a given output level q, the firm should choose the plant size whose average total cost curve offers the lowest cost for that output level. Curve 2 is the lowest at output level q, indicating the most efficient scale of plant for producing that quantity.

Exhibit 7.5 -Refer to Exhibit 7.5,which Shows Four Short-Run Average Cost Curves