Question - The following are cost data for four different size plants available to a competitive producer:
|
Output
|
AC1
|
AC2
|
AC3
|
AC4
|
|
50
|
$80
|
$95
|
$120
|
$150
|
|
100
|
75
|
80
|
100
|
120
|
|
150
|
65
|
60
|
75
|
100
|
|
200
|
75
|
80
|
55
|
75
|
|
250
|
90
|
100
|
80
|
90
|
a) If the market price of this product is $80, which is the best size of plant?
A. The plant represented by AC1.
B. The plant represented by AC2.
C. The plant represented by AC3.
D. The plant represented by AC4.
E. It depends on whether it is the short run or the long run.
b) What will be the price of the product in the long run?
A. $55.
B. $70.
C. $65.
D. $75.
E. Cannot be determined.