How are a firm's short-run and long-run average cost curves related?
A) SRAC is greater than LRAC,which forces the LRAC curve to be upward sloping.
B) SRAC and LRAC slope up or down together,but SRAC is always the steeper of the two curves.
C) The SRAC curve is tangent to and lies above the LRAC curve.
D) The LRAC curve just touches the SRAC curve at its minimum point.

Question

Quizplus · Accepted Answer

In the short run, a firm may not be able to adjust all of its factors of production, resulting in a relatively high average cost. However, in the long run, a firm can adjust all of its inputs, leading to a lower average cost. The LRAC curve represents the minimum achievable average cost for each level of output, and the SRAC curve intersects the LRAC curve at the point where the firm is using its optimal combination of inputs in the short run. Therefore, the SRAC curve is tangent to and lies above the LRAC curve.

How Are a Firm's Short-Run and Long-Run Average Cost Curves