The graph below includes two plant sizes as illustrated by AC 1 and AC 2 . -Refer to the graph above to answer this question.Which of the following statements is correct if a firm is operating at point a on AC₁? A)The firm has achieved capacity output. B)The firm is achieving MES. C)An increase in the output would not lower costs. D)Building a larger plant would result in lower long-run average cost. E)Building a larger plant would not result in lower long-run average cost.

Question

Quizplus · Accepted Answer

Given that point a is on the downward-sloping part of the long-run average cost curve (AC₁), building a larger plant would move the firm down the curve, resulting in lower long-run average cost.

The Graph Below Includes Two Plant Sizes as Illustrated by AC1

The Graph Below Includes Two Plant Sizes as Illustrated by AC₁