The Envelope Curve in cost theory refers to the firm’s:

ALong-Run Average Cost (LRAC) curve

BShort-Run Marginal Cost (SMC) curve

CAverage Variable Cost (AVC) curve

DTotal Fixed Cost (TFC) curve

Explanation

The LRAC curve is called an envelope curve because it envelopes (is tangent to) a series of short-run average total cost (SRATC) curves.

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