The following graph shows the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average total cost curve (LRATC); for example, Q1 marks the point of tangency between SRATC1 and LRATC. The orange point on SRATC3 indicates the firm's current output level in the short run (04).
The following graph shows the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (SRATC) and the long-run average total cost curve (LRATC); for example, Q1 marks the point of tangency between SRATC1 and LRATC. The orange point on SRATC3 indicates the firm's current output level in the short run (04).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph shows the short-run average total cost curves and the long-run average total
cost curve for a publishing firm. The five marked quantities indicate points of tangency between
each short-run average total cost curve (SRATC) and the long-run average total cost curve (LRATC);
for example, Q1 marks the point of tangency between SRATC1 and LRATC.
The orange point on SRATC3 indicates the firm's current output level in the short run (24).
COST PER UNIT
SRATC
LRATC SRATC
SRATC
SRATC
2
fasy
1
23
24
©22 to 24
0 to 23
22
Q₂
1
Q₂
OUTPUT
I
SRATC 5
Q5
In the long run, if the firm decides to keep output at its initial level, what will it likely do?
Stay on SRATC3 but decrease to the point touching LRATC
Shut down
Shift to operate on SRATC4
Shift to operate on SRATC2
?
At which output level (or range of output levels) does the firm produce its current volume of output
most efficiently?
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