The costs (LRAC) and prices (P) for four firms are given in the options below. Which of these cannot lie on the long-run supply curve of a firm?

LRAC = Rs 20, P = Rs 20

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LRAC = Rs 25, P = Rs 20

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LRAC = Rs 20, P = Rs 25

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LRAC = Rs 25, P = Rs 25

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Solution

The correct option is B
LRAC = Rs 25, P = Rs 20

A firm does not supply when the market price is less than the average cost. For option B, P < LRAC.

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