-Refer to Figure 8.6,which shows just three of a firm's various possible short-run average cost curves.Suppose the firm is currently producing 160 units at and average cost of $90 per unit.Which of the following statements is true?
A) The firm could reduce its average cost by employing more capital
B) The firm could reduce its average cost by employing less capital
C) The firm is producing its output at the lowest possible long-run average cost
D) The firm would increase its average cost if it used more capital

Question

-Refer to Figure 8.6,which shows just three of a firm's various possible short-run average cost curves.Suppose the firm is currently producing 160 units at and average cost of $90 per unit.Which of the following statements is true?
A) The firm could reduce its average cost by employing more capital 
B) The firm could reduce its average cost by employing less capital 
C) The firm is producing its output at the lowest possible long-run average cost 
D) The firm would increase its average cost if it used more capital

Quizplus · Accepted Answer

The firm could reduce its average cost by employing more capital, as it is likely operating on a higher short-run average cost curve than necessary.