Are all points on the long-run average cost curve productive efficient?

Accounting Dec 08, 2020

Expert Solution

All the points on the long run average cost curve are not productive efficient. The lowest point on the long-run average cost curve is productive efficient. It shows the level of output that can be produced at a minimum cost when all the factors of production are variable.

The long run average cost curve is U-shaped which shows the falling part which means the average cost is falling with the increase in production due to economies of scale. Minimum point is productive efficient and the rising part shows the inefficiency of factors of production after a certain level which causes diseconomies of scale.

Therefore, all points on the long-run average cost curve are not productive efficient

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