Question

The following graph shows the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average total cost curve (LRATC); for example, Qı marks the point of tangency between SRATC1 and LRATC The orange point on SRATC, indicates the firm's current output level in the short run(Q). SRATC, SRATCE SRATC SRATC, SRATC COST PERUNT OUTPUT

Answer 1

1. Shift to operate on SRATC3

Reason: In the long run, firms produce at the minimum point of LRACT cutve, which takes place at output Q3 (operating on SRATC3)

2. FALSE

Reason: The minimum efficient scale is achieved at minimum point of only LRATC curve and not all AC curves