Question

True or false

"The longrun average total cost
curve is always flatter than the shortrun
average total cost curve, but not
necessarily horizontal"

Answer 1

The LRATC curve is typically flatter than the SRATC curve, but not necessarily horizontal. It represents average costs in the long run when all factors of production are variable.

Step-by-step explanation:

The long-run average total cost (LRATC) curve is typically flatter than the short-run average total cost (SRATC) curve, but it is not necessarily horizontal. The LRATC curve represents the average cost of producing different levels of output when all factors of production are variable. In contrast, the SRATC curve represents the average cost of producing different levels of output when some factors of production are fixed.

For example, if a company has a factory of a certain size, the SRATC curve may be U-shaped with a minimum cost at a specific level of output. In the long run, the company can build a larger factory, allowing for more economies of scale, which results in a flatter LRATC curve.