The long-run average cost curve is tangent to a series of short-run average total cost curves.

Question

Quizplus · Accepted Answer

This statement is true. The long-run average cost (LRAC) curve represents the lowest achievable average cost for a given level of output when all inputs are variable. In contrast, short-run average total cost (SRATC) curves represent average total costs for different levels of output with at least one input fixed. When the LRAC curve is tangent to a series of SRATC curves, it means that the minimum points of the SRATC curves coincide with the LRAC curve, indicating that the firm is producing at the lowest possible cost for each level of output in the short run.

The Long-Run Average Cost Curve Is Tangent to a Series