The correct answer is Option (2) → (B), (A), (C), (D)
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(B) For the first unit of output, both LRMC and LRAC are the same. (This is the starting point, as the average cost of one unit is simply the marginal cost of that unit.)
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(A) As output increases, LRAC initially falls (MC < AC). (This is the first phase, where the cost of each additional unit is less than the average, pulling the average down.)
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(C) After a certain point, LRAC rises (MC > AC). (This is the second phase, where the cost of each additional unit is now greater than the average, pushing the average up.)
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(D) LRMC curve is therefore a 'U'-shaped curve. (This is a concluding statement about the shape of the marginal cost curve itself, which first falls and then rises, giving it a 'U' shape, and which intersects the LRAC curve at its lowest point.)
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