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

question 58

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. If this firm is producing at point B, then

• A) this firm is producing a level of output that is technically inefficient in the long run.
• B) this firm could produce the same level of output at a lower cost with plant size 2.
• C) it should employ more of its variable factors of production.
• D) this firm is experiencing decreasing returns to scale.
• E) plant size 1 is optimal.

---

Definitions:

Neuron Communication

The process by which neurons transmit signals to each other, involving electrical impulses and chemical neurotransmitters.

Hypothalamus

A region of the brain below the thalamus that coordinates both the autonomic nervous system and the activity of the pituitary, controlling body temperature, thirst, hunger, and other homeostatic systems.

Cerebellum

A large structure of the vertebrate brain, located under the occipital lobe, that plays an important role in motor control.

Reticular Formation

An extensive network of neurons located in the brainstem that plays a key role in controlling arousal and consciousness.