-Refer to Figure 7-10. Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄. Now, following a permanent change in demand, it plans to cut production to Q_c units. What will happen to its average cost of production? A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Question

Quizplus · Accepted Answer

The Answer of -Refer to Figure 7-10. Suppose for the past 8 years the firm has been producing Q_dunits per period using plant size ATC₄. Now, following a permanent change in demand, it plans to cut production to Q_c units. What will happen to its average cost of production? A) In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. B) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $41. C) In the short run, its average cost falls from $47 to $37, and in the long run, average cost rises to $41. D) In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.