Question

Which of the following statements concerning the long-run average cost curve is false?

• A. It represents the least-cost input combination for producing each level of output.
• B. It is derived from a series of short-run average cost curves.
• C. The short-run cost curve at the minimum point of the long-run average cost curve represents the least-cost plant size for all levels of output.
• D. None of the above.

Answer 1

The correct option is D None of the above.

The long run cost curve is an envelope curve of all the short run cost curves. It shows the lowest per unit cost of producing each level of output when all inputs have been adjusted. The short run at the minimum of the LRAC, represents the optimum plant size as at this level of output the firm can produce their output at the lowest possible cost.