The following graph shows the shortrun average total cost cu

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 (ATC) and the long-run average total cost curve (LRATC), for example, Q_1 marks the point of tangency between ATC_1 and LRATC. The orange point on ATC_3 indicates the firm\'s current output level in the short run (Q_4). In the long run, if the firm decides to keep output at its initial level, what will it likely do? At which output level (or range of output levels) does the firm produce its current volume of output most efficiently?

Solution

Answer: Shift to Operate on ATC4

Answer: Q3

A firm should produce where ATC is minimum. In the Long Run, firm can change its plant as well.