Question

The following graph shows the short run total cost curves and the long tun total cost curves for a publishing firm. the five marked quantities indicate points of tangency between each short run average total cost curve and the long run average cost curve.

could someone please help me to answer this and give a little explenation for my similar problems?

6. Long-run cost relationships The following graph shows the short-run average total cost curves and the long-run average 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 cost curve (LRAC); for example, Q1 marks the point of tangency between SRATC and LRAC. The orange point on SRATC, indicates the firm's current output level in the short run (Q2). SRATC SRATC SRATC SHATC SRATC LRAC QUANTITY OF OUTPUT hat aill it ikely do? lounl

Answer 1

a) A firm will always operate at its lowest cost in the long run as all the factors in the long run can be changed in the market. Here, they will be producing at curve SRATC2.

b) "E"

the firm will be producing at point 0 to Q3 because the long run curve is downward sloping in this output and after Q3 it starts increasing so for a firm to benefit it will produce where the price is falling in the firm.