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JAMB Economics 2012 Question 23

Question 23

Theory of Costs and Revenue

The long-run average cost curve touches the short-run average cost curves at the

  1. A.minimum points of all short-run average cost curves
  2. B.declining points of all short-run average cost curves
  3. C.minimum point of only one of the short-run cost curves
  4. D.rising points of all short-run average cost curves.
Show the answer and explanation

Answer: C (minimum point of only one of the short-run cost curves)

Explanation

The LRAC curve wraps round all the SRAC curves. Only at the lowest point of LRAC does it touch an SRAC curve at that curve's minimum; elsewhere it touches the falling or rising parts of the SRAC curves.