Multiple choice

What is the other name of the long run average cost curve?

  1. Profit curve

  2. Planning curve

  3. Demand curve

  4. Indifference curve
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B Correct answer
Explanation

The long run average cost curve is known as the planning curve because it helps firms plan their optimal scale of production. It represents the envelope of all short-run average cost curves, showing the minimum average cost at each output level when all factors of production can be varied. This curve guides firms in deciding what plant size to build for their expected production level.

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