If a Competitive Firm Is Producing to the Left of the Minimum

question 63

Multiple Choice

If a competitive firm is producing to the left of the minimum point of its long- run average cost curve, then

• A) it can reduce its unit costs by building a larger plant.
• B) its profits will decrease if it builds a larger plant.
• C) it should shut down.
• D) it cannot be producing its present output efficiently.
• E) it can still be in long- run equilibrium as long as P = SRATC.

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Definitions:

Just-In-Time (JIT)

An inventory management strategy where materials and products are produced or acquired only as needed for immediate use, reducing waste and inventory costs.

Holding Inventory

The process of keeping stock of goods or materials on hand to protect against fluctuations in demand or supply.

Order Level Cost

The cost associated with maintaining inventory at a specified level, often including ordering and holding costs.

Collaborative Relationships

Collaborative relationships refer to partnerships or alliances between businesses or individuals that aim to achieve mutual goals or enhance operational efficiency through shared resources or knowledge.