A firm is producing output less than the output associated with the minimum point on the firm's short run average variable cost curve. At this level of output the firm uses its fixed capital input ________ and its variable labor input ________.
A) at the lowest average cost; at the lowest average cost
B) at the lowest average cost; at a level higher than the lowest average cost
C) at a level higher than the lowest average cost; at the lowest average cost
D) at a level higher than the lowest average cost; at a level higher than the lowest average cost

Question

Quizplus · Accepted Answer

When a firm is producing output less than the output associated with the minimum point on the firm's short-run average variable cost curve, it is not operating at its most efficient level. This means both its fixed capital input and its variable labor input are being used at a level higher than the lowest average cost, as the firm has not reached the scale of production where these inputs are utilized most efficiently.

A Firm Is Producing Output Less Than the Output Associated