The Figure Below Shows a Family of Cost Curves for a Firm

question 31

Multiple Choice

The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes. FIGURE 8-3
-Refer to Figure 8-3. Should this firm ever consider moving from point E (output level Q₃ onSRATC2) to point F (output level Q5 on SRATC3) ?

• A) Yes, because the firm can take advantage of economies of scale.
• B) Yes, if the product price rises enough to lead the firm to expand to plant size 3.
• C) No, because they are already producing at their lowest possible cost at point E.
• D) No, because producing at point F implies a higher cost per unit of output.
• E) Yes, because SRATC3 is the optimal plant size for this firm.

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