Question

A firm is said to be of optimum size when __________________.

• A. marginal cost is equal to marginal revenue
• B. the firm is maximizing its profits
• C. long run marginal cost is at a minimum
• D. long run average total cost is at a minimum

Answer 1

The correct option is D long run average total cost is at a minimum

The LAC curve is the locus of all the points denoting the least cost for producing that level of output. It is a planing curve because on the basis of this the producer decides what the size of the plant should be in order to produce optimally. This optimal point is the minimum point of the long run average cost curve.