Long Run Costs

question

Which of the following statements is true?

A. In the long run, the total variable cost equals the total fixed cost.
B. In the long run, the quantities of all inputs are fixed.
C. In the long run, the average cost curve is always downward sloping.
D. In the long run, all costs are variable costs.
E. In the long run, the firms' fixed costs are greater than its variable costs.

answer

In the long run, all costs are variable costs.

question

The long-run average cost curve is U-shaped because of which of the following?

A. constant fixed costs as output is increased
B. decreasing average fixed costs as output is increased
C. increasing marginal returns as more labor is hired
D. decreasing marginal returns as more labor is hired
E. economies and diseconomies of scale

answer

economies and diseconomies of scale

question

Diseconomies of scale is a result of

A. larger fixed costs as the firm's production increases.
B. difficulties of coordinating and controlling a large enterprise.
C. technological progress.
D. mismanagement.
E. specialization of labor, capital, and management.

answer

difficulties of coordinating and controlling a large enterprise.

question

Diseconomies of scale is

A. a long run phenomenon.
B. the result of decreasing marginal returns.
C. the result of increasing marginal returns.
D. a short run phenomenon.
E. possible only when the firm's plant size is fixed.

answer

a long run phenomenon.

question

If a company triples its output and its average cost decreases, then the firm is definitely experiencing

A. decreasing marginal returns.
B. increasing marginal returns.
C. diseconomies of scale.
D. economies of scale.
E. Both answers C and D are correct.

answer

economies of scale.

question

The main source of economies of scale is

A. increasing average costs.
B. greater specialization of both labor and capital.
C. reductions in the price of factors of production.
D. decreasing marginal product.
E. the ability to hire less labor.

answer

greater specialization of both labor and capital.

question

In the long run, constant returns to scale necessarily occur when the firm increases its production and the firm's

A. total cost does not change.
B. average total cost increases .
C. production increases by more than does the firm's total cost.
D. total cost increases.
E. average total cost does not change.

answer

average total cost does not change.

question

The long run average cost curve

A. always falls as output increases.
B. shows the lowest average cost facing a firm as it increases output changing both its plant and labor force.
C. always rises as output increases.
D. is the sum of a firm's short run average cost curves.
E. initially rises when output increases and then falls when output increases.

answer

shows the lowest average cost facing a firm as it increases output changing both its plant and labor force.

question

The figure above shows some of a firm's cost curves.
Based on the figure above, curve B is the firm's

A. marginal cost curve.
B. average total cost curve.
C. total cost curve.
D. average fixed cost curve.
E. average variable cost curve.

answer

average variable cost curve.

question

As output increases, economies of scale occur when the

A. long-run average cost increases.
B. long-run average cost stays constant.
C. long-run average cost decreases.
D. short-run average total cost decreases.
E. long-run fixed cost decreases.

answer

long-run average cost decreases.

question

The figure above shows some of a firm's cost curves.
Based on the figure above, curve A is the firm's

A. total cost curve.
B. average total cost curve.
C. average variable cost curve.
D. average fixed cost curve.
E. marginal cost curve.

answer

average fixed cost curve.

question

The figure above shows some of a firm's cost curves.
Based on the figure above, curve C is the firm's

A. average total cost curve.
B. average variable cost curve.
C. total cost curve.
D. average fixed cost curve.
E. marginal cost curve.

answer

average total cost curve.

question

In the long run,

A. all inputs are fixed.
B. all inputs can be varied.
C. some inputs are variable and other inputs are fixed.
D. total variable cost cannot be changed.
E. output is fixed.

answer

all inputs can be varied.

question

The figure above shows a firm's total product curve.
Which of the points show efficient production points?

A. All the points above and on the TP curve
B. All the darkened points below the TP curve
C. All points on the TP curve
D. All the darkened points below and on the TP curve
E. All points above the TP curve

answer

All points on the TP curve

1 of 14

question

answer

In the long run, all costs are variable costs.

question

answer

economies and diseconomies of scale

question

answer

difficulties of coordinating and controlling a large enterprise.

question

answer

a long run phenomenon.

question

answer

economies of scale.

question

answer

greater specialization of both labor and capital.

question

answer

average total cost does not change.

question

answer

shows the lowest average cost facing a firm as it increases output changing both its plant and labor force.

question

answer

average variable cost curve.

question

answer

long-run average cost decreases.

question

answer

average fixed cost curve.

question

answer

average total cost curve.

question

In the long run,

A. all inputs are fixed.
B. all inputs can be varied.
C. some inputs are variable and other inputs are fixed.
D. total variable cost cannot be changed.
E. output is fixed.

answer

all inputs can be varied.

question

answer

All points on the TP curve

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Long Run Costs

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