The long- run average cost (LRAC)curve shows
A)what happens to the fixed costs in the long run.
B)the same as the short- run average cost curve.
C)the lowest unit cost at which the firm can produce a given output.
D)the operation of the law of diminishing returns.
E)the highest unit costs of producing a given output.

Question

Quizplus · Accepted Answer

The long-run average cost (LRAC) curve shows the lowest unit cost at which the firm can produce a given output, which is different from the short-run average cost curve as it includes both fixed and variable costs. The LRAC curve takes into account the ability of the firm to adjust all inputs in the long run, so it shows the most efficient scale of production. Therefore, option C is the correct choice.

The Long- Run Average Cost (LRAC)curve Shows