Question

In the long-run, a company will choose a manufacturing plant size that has the Multiple Choice minimum average total cost of producing the target level of output. maximum level of resource use per unit of the total product of output. capacity to produce the largest quantity of the product. minimum of average fixed costs.

Answer 1

In the long run, a company will choose a plant size that minimizes the average total cost for their desired level of output, maximizing economies of scale. The long-run average cost curve helps in making this decision. Diseconomies of scale occur when a plant becomes too large, resulting in higher average costs.

Step-by-step explanation:

In the long run, a company aims to find an optimal scale of production to maximize efficiency and minimize costs. The ideal plant size is the one that achieves the minimum average total cost for the target level of output or quantity. This concept is tied to economies of scale, where producing a larger quantity of goods leads to lower costs per unit. Conversely, if a company grows too large, it may suffer from diseconomies of scale, where average costs increase due to complex management and communication issues.

Manufacturers, like those in warehouse stores such as Costco or Walmart, demonstrate economies of scale by operating larger factories that produce goods at a lower average cost compared to smaller ones. The long-run average cost curve guides firms in deciding which level of fixed costs will result in the lowest average costs for their desired output level. Therefore, the decision about manufacturing plant size is critical in achieving cost efficiency in the long term.

Answer 2

minimum average total cost of producing the target level of output.

Step-by-step explanation:

Firms will always seek a profit maximizing output. This means that they will choose a manufacturing plant that allows them to sell more units while keeping the lowest possible marginal costs. This means that they will focus on choosing a production level that minimizes the average total cost for a certain amount of expected production.