Economics weakest link questions: Short run and long run costs
Q1 Which law explains why short run average cost curves fall and then rise?
A1 The law of diminishing returns.
Q2 The characteristic U-shaped long run average cost curve can be explained
by the existence of what?
A2 Economies and diseconomies of scale
Q3 With reference to the long run average cost curve, what does the acronym
MES stand for?
A3 Minimum efficient scale
Q4 Average fixed costs will remain constant as output increases. True or
false?
A4 False
Q5 If a firm increases output from 400 to 750 units after doubling all of
its factor inputs. It can be said that it has experienced (a) increasing,
(b) constant or (c) decreasing returns to scale?
A5 Decreasing returns.
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