Constant returns to scale exist when long-run average costs
Correct answer(s):
- Remain constant as output is increased
Topic
The Production Process and Costs
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Quizzes in The Production Process and Costs
Suppose the long-run average cost curve is U-shaped. When LRAC is in the increasing stage, there exist
Correct answer(s):
- Dis economies of scale
The long-run average cost curve defines the minimum average cost of producing alternative levels of output, allowing for optimal selection of
Correct answer(s):
- All factors of production
Economies of scale exist whenever long-run average costs
Correct answer(s):
- Decrease as output is increased
When there are economies of scope between products, selling off an unprofitable subsidiary could lead to
Correct answer(s):
- Only a minor reduction in costs
When there are economies of scope between two products which are separately produced by two firms, merging into a single firm can
Correct answer(s):
- Accomplish a reduction in costs
Cost complementary exits in a multi-product cost function when
Correct answer(s):
- The marginal cost of producing one output is reduced when the output of another product is increased
The difference between average total costs and average variable costs is
Correct answer(s):
- Average fixed cost
When marginal cost curve is below an average cost curve, average cost is
Correct answer(s):
- Declining with output
The marginal cost curve
Correct answer(s):
- Intersects the ATC and AVC at their minimum points
Average fixed cost
Correct answer(s):
- Declines continuously as output is expanded
Sunk costs are those costs that
Correct answer(s):
- Are forever lost after they have been paid
If the price of labor increases, in order to minimize the costs of producing a given level of output, the firm manager should use
Correct answer(s):
- Less of labor and more of capital
If the marginal product per dollar spent on capital is less than the marginal product per dollar spent on labor, then in order to minimize costs the firm should use
Correct answer(s):
- Less capital and more labor
For given input prices, isocosts farther from the origin are associated with
Correct answer(s):
- Higher costs
An isocost line
Correct answer(s):
- Represents the combinations of K and L that cost the firm the same amount of money
Whenever an isoquant exhibits a diminishing marginal rate of technical substitution, the corresponding isoquants are
Correct answer(s):
- Convex to the origin
The marginal rate of technical substitution
Correct answer(s):
- Is the absolute value of the slope of the isoquant
The isoquants are normally drawn with a convex shape because inputs are
Correct answer(s):
- Not perfectly substitutable
An isoquant defines the combination of inputs that yield the producer
Correct answer(s):
- The same level of output