Figure 11-11

Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 11-11.If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc ,

Question

Figure 11-11
  
Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCₐ, ATCb and ATCc.
-Refer to Figure 11-11.If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale operation represented by ATCc ,

Quizplus · Accepted Answer

If the firm chooses to produce and sell 25,000 frames per month by operating in the short run with a scale of operation represented by ATCc, it will be operating at the minimum point on the ATCc curve. This means that the firm is operating efficiently at this level of production in the short run. The firm would not lower its average costs by reducing its scale of operation because it is already at its minimum efficient scale in the short run. Therefore, the correct answer is B, the firm will be operating efficiently. It is not possible to determine if the firm will be able to earn a profit based on the information provided.

Figure 11-11 Figure 11-11 Illustrates the Long-Run Average Cost Curve for a Average