The long-run average cost curve is called a planning curve because it shows what happens to costs when: A. a biggest size of plant is built B. different sizes of plants are built C. variable inputs are increased D. fixed factors are increased

Economics
The long-run average cost curve is called a planning curve because it shows what happens to costs when: A. a biggest size of plant is built B. different sizes of plants are built C. variable inputs are increased D. fixed factors are increased

ScanSolve AI Answer

Step 1: The long-run average cost (LRAC) curve shows the lowest possible average cost for each output level when the firm can adjust all inputs, including plant size.

Step 2: In the long run, there are no fixed factors—all inputs are variable, so firms can choose optimal plant sizes.

Step 3: Option A is incorrect: LRAC does not focus only on the "biggest" plant.

Step 4: Option C is incorrect: Increasing only variable inputs describes short-run adjustments.

Step 5: Option D is incorrect: There are no fixed factors in the long run.

Step 6: Option B is correct: LRAC shows costs when different sizes of plants are built, acting as a "planning curve" for scale decisions.

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