Which of the following statements with respect to the figure below is INCORRECT?
A) All the possible short-run average cost curves that correspond to the different plant sizes are shown as SAC1 - SAC8.
B) If the anticipated permanent rate of output per unit time period is Q1 in panel (a), the optimal plant would correspond to SAC1.
C) If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3.
D) The long-run average cost curve LAC in panel (b) is sometimes called the planning curve representing the locus (path) of points.

Question

Which of the following statements with respect to the figure below is INCORRECT? 
A) All the possible short-run average cost curves that correspond to the different plant sizes are shown as SAC1 - SAC8. 
B) If the anticipated permanent rate of output per unit time period is Q1 in panel (a), the optimal plant would correspond to SAC1. 
C) If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3. 
D) The long-run average cost curve LAC in panel (b) is sometimes called the planning curve representing the locus (path) of points.

Quizplus · Accepted Answer

If the permanent rate of output increases to Q2, it will be more profitable to have a plant size corresponding to a lower short-run average cost curve such as SAC2 or SAC3, rather than SAC1 which corresponds to a smaller plant size and lower output level.

Which of the Following Statements with Respect to the Figure