Figure 11-6 Figure 11-6 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCa,ATCb and ATCc.
-Refer to Figure 11-6.If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc

Question

Figure 11-6  Figure 11-6 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATCa,ATCb and ATCc.
-Refer to Figure 11-6.If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc

Quizplus · Accepted Answer

When the firm produces and sells 25,000 frames per month by operating in the short run with a scale operation represented by ATCc, it is producing at its minimum efficient scale and hence operating efficiently. The long-run average cost curve also intersects the short-run average cost curve at this point, indicating that this is the optimal scale of operation for the firm. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they do not accurately reflect the relationship between the firm's scale of operation and its efficiency/profitability.

Figure 11-6 Figure 11-6 Illustrates the Long-Run Average Cost