Question on: JAMB Economics - 2003

The long-run average cost curve (LRAC) is often referred to as a planning curve. This is because it helps a firm plan for its future production. In the long run, all factors of production are variable. The LRAC curve shows the lowest possible average cost for producing each level of output when the firm can choose the optimal size of plant. It envelopes a series of short-run average cost curves (SRAC), each corresponding to a different plant size. * **A.** This is a component of the answer but not the full picture. * **B.** This is the most accurate answer because the long-run allows for changing the size of all plants. * **C.** This describes the short-run scenario. * **D.** This describes the short-run scenario,