The long-run average cost curve is called a planning curve because it shows what happens to costs when: A. a…

Question

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 Tutor · Accepted 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. B

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

Answer

Step-by-step solution

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.

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

Option A is incorrect

Option C is incorrect

Option D is incorrect

Option B is correct

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