The Point of Tangency Between the Short- Run Average Total

question 31

Multiple Choice

The point of tangency between the short- run average total cost (SRATC) curve and the long- run average cost (LRAC) curve occurs

• A) at a point where average total cost is falling but the marginal cost is rising.
• B) at the point of minimum SRATC.
• C) at a point where both the average total cost and the marginal cost is rising.
• D) only when the LRAC curve is at its minimum.
• E) at an output level for which the quantity of the fixed factor is optimal.

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Definitions:

Retained Earnings

The part of the net earnings not paid out as dividends to shareholders but instead retained by the business for reinvestment purposes or debt repayment.

Cumulative Earnings

The total amount of net income a company has earned over its existence, after dividends and other distributions are subtracted.

Accounting Equation

A fundamental principle representing the relationship among assets, liabilities, and owner's equity (Assets = Liabilities + Owner's Equity).

Transactions

The exchange of goods, services, or funds between two or more parties in accounting, each recorded as an entry.