The following are cost data for four different size plants available to a competitive producer:

-Refer to the above information to answer this question.If the market price of this product is $80,which is the best size of plant?
A)The plant represented by AC1.
B)The plant represented by AC2.
C)The plant represented by AC3.
D)The plant represented by AC4.
E)It depends on whether it is the short run or the long run.

Question

The following are cost data for four different size plants available to a competitive producer:
 
-Refer to the above information to answer this question.If the market price of this product is $80,which is the best size of plant?
A)The plant represented by AC1. 
B)The plant represented by AC2. 
C)The plant represented by AC3. 
D)The plant represented by AC4. 
E)It depends on whether it is the short run or the long run.

Quizplus · Accepted Answer

The best size of plant is the one that can produce at the lowest cost per unit. Looking at the table, we can see that the cost per unit for AC3 is the lowest at $55. Therefore, the producer should choose the plant represented by AC3 to maximize profits.

The Following Are Cost Data for Four Different Size Plants