The minimum average cost of producing alternate levels of output, allowing for optimal selection of all variables of production is defined by the:
A)Long run average total cost curve.
B)Short run average fixed cost curve.
C)Short run marginal cost curve.
D)Long run marginal cost curve.

Question

Quizplus · Accepted Answer

The long run average total cost (LRATC) curve takes into account all possible combinations of inputs to produce different levels of output. This allows for optimal selection of all variables of production and results in the minimum average cost of producing each level of output. The short run average fixed cost (SRAFC) curve only takes into account fixed costs and does not consider variable costs, while the short run marginal cost (SRMC) curve only shows the additional cost of producing one more unit of output in the short run. The long run marginal cost (LRMC) curve is similar to the LRATC curve but only shows the additional cost of producing one more unit of output in the long run.

The Minimum Average Cost of Producing Alternate Levels of Output