Question

In: Economics

Draw a neatly labelled LRAC curve with at least 3 SRAC curves contained within it and...

Draw a neatly labelled LRAC curve with at least 3 SRAC curves contained within it and explain how LRAC is used as an output planning mechanism for how much a firm should produce.

Solutions

Expert Solution

If Xx output to be produced then SRAC3 curve will be used and if Xz is to be produced then SRAC6 curve will be used.

Long run average cost is minimum at output level Xm.


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