Module 56

question

Long-Run Average Total Cost Curve

answer

- aka LRATC shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

Economies of Scale

answer

- when long-run average total cost declines as output increases

question

Increasing Returns to Scale

answer

- when output increases more than in proportion to an increase in all inputs

eg. with increasing returns to scale, doubling all inputs would cause output to more than double

question

Minimum Efficient Scale

answer

- the smallest quantity at which a firm's long-run average total cost is minimized

question

Diseconomies of Scale

answer

- when long-run average total cost increases as output increases

question

Decreasing Returns to Scale

answer

- when output increases less than in proportion to an increase in all inputs

question

Constant Returns to Scale

answer

- when output increases directly in proportion to an increase in all inputs

question

Sunk Cost

answer

- cost that has already been incurred and is nonrecoverable

- should be ignored in a decision of future actions

1 of 8

question

Long-Run Average Total Cost Curve

answer

- aka LRATC shows the relationship between output and average total cost when fixed cost has been chosen to minimize average total cost for each level of output

question

Economies of Scale

answer

- when long-run average total cost declines as output increases

question

Increasing Returns to Scale

answer

- when output increases more than in proportion to an increase in all inputs

eg. with increasing returns to scale, doubling all inputs would cause output to more than double

question

Minimum Efficient Scale

answer

- the smallest quantity at which a firm's long-run average total cost is minimized

question

Diseconomies of Scale

answer

- when long-run average total cost increases as output increases

question

Decreasing Returns to Scale

answer

- when output increases less than in proportion to an increase in all inputs

question

Constant Returns to Scale

answer

- when output increases directly in proportion to an increase in all inputs

question

Sunk Cost

answer

- cost that has already been incurred and is nonrecoverable

- should be ignored in a decision of future actions

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Module 56

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Privacy policy

Fair-cooperation guarantee