"Assuming the long-run average cost curve is U-shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve." True or false?
Indicate whether the statement is true or false
False. The optimal point in the long run depends on the demand for the firm's product. If demand is small, the firm will prefer a relatively small plant and will operate to the left of minimum LRAC. A firm anticipating a large demand may find it optimal to produce beyond minimum LRAC. Later, there will be a tendency to operate at minimum LRAC when a firm faces competition, but there is no such discipline on the firm in this chapter.
You might also like to view...
Which of the following statement is true?
a. The demand for Cheerios is less elastic than the demand for cereal b. The demand for gas is more elastic in the short-run than in the long-r c. The demand for puma shoes is more elastic than the demand for shoes d. Products with many complements have a more elastic demand
An example of a sunk cost would be:
A. the cost of a movie ticket once you've started watching the movie. B. the value of a lift ticket once you've started skiing. C. the admission fee you paid to enter a national park. D. All of these are examples of sunk costs.