The graph below includes two plant sizes as illustrated by AC 1...

The graph below includes two plant sizes as illustrated by AC₁ and AC₂.

  

Refer to the graph above to answer this question. Which of the following statements is correct if a firm is operating at point a on AC₁?

Select one:

A.An increase in the output would not lower costs.

B.Building a larger plant would result in lower long-run average cost.

C.The firm is achieving MES.

D.The firm has achieved capacity output.

E.Building a larger plant would not result in lower long-run average cost.

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Question 22

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The graph below includes two plant sizes as illustrated by AC₁ and AC₂.

  

Refer to the graph above to answer this question. All of the following statements except one are correct if a small market limits a firm's output to Q₁. Which is the exception?

Select one:

A.The firm is experiencing excess capacity.

B.The firm would benefit from a larger market.

C.Building a larger plant would lower the firm's average cost of producing Q₁.

D.The firm is not achieving minimum efficient scale.

E.The firm is not achieving capacity output in plant 1.

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Question 23

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The graph below includes two plant sizes as illustrated by AC₁ and AC₂.

  

Refer to the graph above to answer this question. If the firm is producing in a plant with AC₁ as its short run average cost curve, and a small market is limiting the firm's output to Q₁, which of the following statements is true?

Select one:

A.The firm would benefit from a larger market because it could build a larger plant, capture economies of scale and achieve economic capacity.

B.The firm would benefit from a larger market because it could build a larger plant and capture economies of scale, but it still would not be able to achieve economic capacity.

C.Increasing the output in the current plant size would not lower the short-run average cost.

D.Building a larger plant would lower the firm's average cost of producing Q₁₀.