A profit- maximizing firm with variable labour and capital will always produce
A) at a point on the LRAC curve where it is experiencing economies of scale.
B) at the minimum point of the LRAC curve.
C) at the tangency of the relevant SRATC curve and the LRAC curve.
D) anywhere along the LRAC curve.
E) at the minimum of the relevant SRATC curve and the LRAC curve.

Question

Quizplus · Accepted Answer

A profit-maximizing firm will produce at the tangency of the relevant Short-Run Average Total Cost (SRATC) curve and the Long-Run Average Cost (LRAC) curve, as this represents the lowest cost combination of inputs for a given level of output in the long run.

A Profit- Maximizing Firm with Variable Labour and Capital Will