The correct answer is: A. Falls when the LMC curve falls.
The long-run average cost (LRAC) curve is the envelope of the short-run average cost (SRAC) curves. This means that the LRAC curve is the lowest possible average cost that a firm can achieve in the long run, given its technology and input prices. The LRAC curve will fall when the LMC curve falls because the LMC curve is the marginal cost of producing one more unit of output. When the LMC curve falls, it means that it is cheaper to produce one more unit of output. This means that the firm can produce more output at a lower cost, and the LRAC curve will fall.
The SRAC curve is the average cost of producing a given level of output in the short run. The SRAC curve is U-shaped because of the law of diminishing returns. As the firm produces more output, it must use more of its inputs, and the marginal cost of production increases. This causes the SRAC curve to rise.
The LMC curve is the marginal cost of producing one more unit of output in the long run. The LMC curve is always below the SRAC curve because the firm can always find a way to produce more output at a lower cost in the long run. This is because the firm can adjust its plant size and other inputs in the long run.
The LAC curve is the envelope of the SRAC curves. This means that the LAC curve is the lowest possible average cost that a firm can achieve in the long run, given its technology and input prices. The LAC curve will fall when the LMC curve falls because the LMC curve is the marginal cost of producing one more unit of output. When the LMC curve falls, it means that it is cheaper to produce one more unit of output. This means that the firm can produce more output at a lower cost, and the LAC curve will fall.