The following figure shows the long-run average cost curve for a tire manufacturer and the long-run average cost curve for a rubber producer. Which of the following is indicated by the figure given below?
Figure 14.1

Question

The following figure shows the long-run average cost curve for a tire manufacturer and the long-run average cost curve for a rubber producer. Which of the following is indicated by the figure given below?​ ​
Figure 14.1
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Quizplus · Accepted Answer

The point where the two curves intersect indicates the minimum efficient scale (MES) for producing tires, which is 200,000 tires. This means that the tire manufacturer would be able to produce 200,000 tires at the lowest possible cost per unit. Any production level below this would result in higher costs per unit, and any production level above this would bring diminishing returns and result in higher costs per unit as well. Therefore, the correct answer is C.

The Following Figure Shows the Long-Run Average Cost Curve for a Tire