Refer to Figure 11-10. Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4. Now, following a permanent change in demand, it plans to cut production to Qc units. What will happen to its average cost of production? In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

Refer to Figure 11-10. Suppose for the past 8 years the firm has been producing Qd units per period using plant size ATC4. Now, following a permanent change in demand, it plans to cut production to Qc units. What will happen to its average cost of production? In the short run, its average cost falls from $47 to $41, and in the long run, average cost falls even further to $37. In the short run, its average cost rises from $47 to $55, and in the long run, average cost falls to $37.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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