A short-run average cost curve is tangent to the long-run average cost curve at the quantity where:
A) the fixed plant size would have been optimal.
B) short-run marginal cost is minimized.
C) short-run marginal cost is equal to average cost.
D) short-run average cost is minimized.
E) long-run average cost is minimized.

Question

Quizplus · Accepted Answer

In the long run, firms can adjust all inputs, including plant size, to minimize costs. The short-run average cost curve is tangent to the long-run average cost curve at the quantity where the fixed plant size is optimal, reflecting the lowest cost for that specific output level given the current plant size.

A Short-Run Average Cost Curve Is Tangent to the Long-Run