The diagram illustrates the long-run average cost (LRAC) curve for a firm together with three short-run average cost (SRAC) curves. Which statement is correct?
- AWhen the minimum point of SRAC3 is lower than the minimum point of SRAC2 it reflects the law of variable proportions.
- BThe law of diminishing returns explains why each of the SRAC curves is U-shaped.
- CThe position of SRAC2 shows the minimum efficient scale of production.
- DThe rising section of SRAC1 indicates the existence of diseconomies of scale.