The minimum possible short-run average costs are equal to long-run average costs when
A) the plant is producing at its short-run minimum point.
B) short-run and long-run costs are declining.
C) the long-run curve is at a minimum point.
D) production is at any point on the LAC curve.

Question

Quizplus · Accepted Answer

The long-run average cost (LAC) curve represents the minimum average cost at which the firm can produce at any level of output. The short-run average cost (SAC) curve is U-shaped, reflecting the temporary nature of short-run decisions. SAC is always above the LAC curve due to the fixed costs incurred in the short-run. Therefore, the minimum possible short-run average costs of production can never be equal to long-run average costs when a plant is producing at its short-run minimum point or when short-run and long-run costs are declining. Only when the long-run curve is at a minimum point can the minimum possible short-run average costs be equal to long-run average costs.

The Minimum Possible Short-Run Average Costs Are Equal to Long-Run