Answer to Question #287438 in Microeconomics for the uneducated

Question

Will the envelope curve be tangential to the bottom of each of the short-run average cost curves? Explain why it should or should not be.

Answer 1

The cost-minimizing point for that level of output is the point of tangency. The ATC curves for the short run depict distinct plant scales that cannot be adjusted in the short run. Because enterprises have less flexibility in the short run and costs are higher, they are all above the LRAC.