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JAMB Economics 2003 Question 18

Question 18

Theory of Costs and Revenue

The long-run average cost curve is called a planning curve because it shows what happens to costs when

  1. A.a bigger size of plant is built
  2. B.different sizes of plants are built
  3. C.variable inputs are increased
  4. D.fixed factors are increased
Show the answer and explanation

Answer: B (different sizes of plants are built)

Explanation

The long-run average cost curve shows the lowest cost of each output when the firm can choose any plant size, so it helps the firm plan which size of plant to build.