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

question 70

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 profit-maximizing firm ever consider moving from point E (output level Q₃ on SRATC₂) to point F (output level Q₅ on SRATC₃) ?

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

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