Which of the following is correct?
A) A firm's short-run average cost curve is derived from a series of long-run average cost curves.
B) A firm's long-run average cost curve is derived from a series of short-run average cost curves.
C) A firm's long-run total cost is the difference between its long-run fixed cost and long-run variable cost.
D) Both answers A and C are correct.

Question

Quizplus · Accepted Answer

A firm's long-run average cost curve is derived from a series of short-run average cost curves because in the short-run, some inputs are fixed and cannot be changed, while in the long-run, all inputs can be varied. Therefore, the short-run average cost curves represent different levels of production capacity, which can be used to construct the long-run average cost curve. Option A is incorrect because the short-run average cost curve cannot be derived from long-run average cost curves. Option C is incorrect because long-run total cost is the sum of long-run fixed cost and long-run variable cost, not the difference between them. Option D is incorrect because only option B is correct.

Which of the Following Is Correct