Asked by Yoselin Ramirez on May 07, 2024
Verified
The long-run average cost curve is tangent to a series of short-run average total cost curves.
Long-Run Average Cost Curve
A curve that shows the lowest average cost at which a firm can produce any given level of output in the long run, when all inputs are variable.
Short-Run
A period during which at least one input (for example, plant size, machinery) in the production process is fixed and cannot be changed.
Tangent
A straight line that touches a curve at a single point without crossing it, often used in geometry and calculus to represent the slope of the curve at that point.
- Appreciate the impact of economies of scale on the trends of costs over the long term.
Verified Answer
LM
Layni ManosMay 08, 2024
Final Answer :
True
Explanation :
This statement is true. The long-run average cost (LRAC) curve represents the lowest achievable average cost for a given level of output when all inputs are variable. In contrast, short-run average total cost (SRATC) curves represent average total costs for different levels of output with at least one input fixed. When the LRAC curve is tangent to a series of SRATC curves, it means that the minimum points of the SRATC curves coincide with the LRAC curve, indicating that the firm is producing at the lowest possible cost for each level of output in the short run.
Learning Objectives
- Appreciate the impact of economies of scale on the trends of costs over the long term.