Question

1) the long run cost curve is called the planning envelope because

a. is is a succession of short run costs curves

b. the choice of imput combinations are flexible

c. because it will determine the optimal plant size

d. all of the above

2) an industry with many different plant sizes is one with

a. a long economies of scale

b. quick diseconomies of scale

c. constant economies of scale

d. it can be a combination of different types of LRAC

Answer 1

1-Answer: Long run average cost curve is called planning envelope because it envelopes all of the short run average cost curve which means all points on a possible short run average cost curve will be above or on the long run average cost curve.

Hence,Answer is option (A)

2-Answer: An industry with many different plant size is one with a long economy to scale because firms can compete according to the quantity demanded in the market.

Hence,answer is option (A)