Discussion
X : Long run average cost curve is flat U-shaped.
Y : It is called an envelope curve.
Answer: C
Both X and Y are correct.
The long run average cost curve is U-shaped, but flatter than the short run curves, because in the long run the firm can adjust all inputs and economies and diseconomies of scale set in gradually. That is statement X.
It is drawn as the curve that is tangent to each short run average cost curve, enveloping them all from below, which is why it is called the envelope curve (statement Y). Since both are true, the options rejecting one or both are wrong.
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