If the firm in the accompanying graph expanded its scale of production and found that its average costs did not change, which of the curves would reflect this situation?

Question

Quizplus · Accepted Answer

If the firm expands its scale of production and finds that its average costs do not change, it means that the production is still being carried out at the minimum efficient scale, and LRATC2 represents this scale as it intersects with the firm's MC curve at the lowest point. LRATC1 and LRATC3 represent scales below and above the minimum efficient scale, respectively, and would not reflect a situation where average costs remain unchanged after an expansion of production.

If the Firm in the Accompanying Graph Expanded Its Scale