The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3

-The long run is referred to as a planning horizon because:
A)the firm has committed to a fixed quantity of at least one resource and the other resources are variable.
B)the manager has selected the size of the firm that appears to be the least profitable and does not have the option of selecting any other plant size.
C)the firm has not committed to a fixed quantity of any resource and has all options available to it.
D)the manager has selected a scale of production.
E)the firm is operating along a specific average-cost curve.

Question

The figure given below shows three Short Run Average Total Cost (SRATC) curves and the Long Run Average Total Cost (LRATC) curve of a firm.Figure 8.3
 
-The long run is referred to as a planning horizon because:
A)the firm has committed to a fixed quantity of at least one resource and the other resources are variable. 
B)the manager has selected the size of the firm that appears to be the least profitable and does not have the option of selecting any other plant size. 
C)the firm has not committed to a fixed quantity of any resource and has all options available to it. 
D)the manager has selected a scale of production. 
E)the firm is operating along a specific average-cost curve.

Quizplus · Accepted Answer

The long run is a planning horizon because in this time frame, the firm has not committed to a fixed quantity of any resource and has all options available to it. This means that the firm can adjust all of its inputs, including capital and labor, to achieve the most efficient production level. The long run is thus a period of time during which the firm can make all necessary adjustments to its production process. Therefore, option C is the best choice.

The Figure Given Below Shows Three Short Run Average Total