Question

10. Long-run cost relationships 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 (ATC) and the long-run average total cost curve (LRATC); for example, Q, marks the point of tangency between ATC, and LRATC. The orange point on ATC3 indicates the firm's current output level in the short run (0). ATC AT LRA ATC AT OUTPUT In the long run, if the firm decides to keep output at its initial level, what will it likely do? Shift to operate on ATC Shift to operate on ATC Shut down Stay on ATC3 but decrease to the point touching LRATC Given the average total costs, at which output level (or range of output levels) will the firm produce most efficiently? 0 2, to 24 0 0 Grade It Now Save & Continue Continue without saving

Answer 1

10. Long-run cost relationships 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 (ATC) and the long-run average total cost curve (LRATC); for example, Q, marks the point of tangency between ATC, and LRATC. The orange point on ATC3 indicates the firm's current output level in the short run (0). ATC AT LRA ATC AT In the long run, if the firm decides to keep output at its initial level, what will it likely do? The unit cost of production on ATC4 at Q4 level of output is least compared to ATC3 Option 2 Shift to operate on ATC ift to operate on ATC4 Shut down Stay on ATC3 but decrease to the point touching LRATC Given the average total costs, at which output level (or range of output levels) will the firm produce most efficiently? 0 Option 3 2, to 24 уб At Q3 firms faces the least per unit cost of production It is the minimum efficient scale o to 0 Grade It Now Save & Continue Continue without saving