CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Refer to the graph below. A firm that produces 900 units of output using the plant size associated with SATC3 minimizes ______.

A. both long-run and short-run average total cost
B. long-run average total cost only
C. short-run average total cost only
Correct Answer: A

At this combination, no change in output or plant size can reduce either long-run or short-run average total cost.

User Contributed Comments 7

User Comment
danlan Do not understand the meaning of SATC1, SATC2, SATC3 and LATC
mike555 SATC1 is short run Average total Cost
LATC is long run Average Total Cost
osebeyo cost is minimized in the long run when short run average total cost equals the long run average total cost at the point where LATC is lowest
gullan LRATC is equal to SRATC only for this particular instance(i.e 900 units of output). For other level of output LRATC and SRATC minimum values will not be same.
AUAU tricky. Y not only longrun.
hardig i think because the LTAC curve is made up of many Short term curves, so the bottom of STAC3 barks both the lowest point of STAC, but also creates the low point on the LTAC curve.
dmfz This should be long run.
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