Question

Which of the following is the best description of what is shown by the long-run average cost (LRAC) curve?

a. the firm's average of total fixed and total variable costs at each level of output
b. the firm's total variable costs averaged for each level of input
c. the firm's total cost at each level of output
d. the firm's least expensive average total cost for any level of output

Answer 1

Answer: d. the firm's least expensive average total cost for any level of output

Step-by-step explanation:

In the long-run, the company is expected to be able to solve whatever problems that is limiting its efficiency such that it is only able to produce at the cheapest costs possible.

The long-run average cost curve will therefore try to illustrate this by showing the least expensive average total cost for any level of output. Every point on the LRAC will be the lowest total cost associated with the level of output that it is graphed against.