The long-run average cost curve touches the short-run average cost curve at the A. minimum points of all short-run average cost curves B. declining points of all short-run average cost curves C. minimum point of only one of the short run cost curve D. rising points of all short-run average cost curves

Question 1

Answer · 2026-03-16T16:35:05.080Z

Step 1: The long-run average cost (LRAC) curve is the lower envelope of all possible short-run average cost (SRAC) curves, each for a different fixed input (plant size) level. Step 2: For each output level, LRAC equals the minimum SRAC over all plant sizes. Step 3: The LRAC touches (is tangent to) each SRAC at the plant size optimal for that output, which occurs precisely at the minimum point of that SRAC (where short-run marginal cost equals SRAC). Step 4: Thus, across all SRACs, the points of tangency are the minimum points of all short-run average cost curves (not just declining/rising portions or only one curve). The correct description is option A. A

Question 2

Step 1: The long-run average cost (LRAC) curve is the lower envelope of all possible short-run average cost (SRAC) curves, each for a different fixed input (plant size) level. Step 2: For each output level, LRAC equals the minimum SRAC over all plant sizes. Step 3: The LRAC touches (is tangent to) each SRAC at the plant size optimal for that output, which occurs precisely at the minimum point of that SRAC (where short-run marginal cost equals SRAC). Step 4: Thus, across all SRACs, the points of tangency are the minimum points of all short-run average cost curves (not just declining/rising portions or only one curve). The correct description is option A. A

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