"The short-run average total cost curve and the long-run average cost curve are both U-shaped for the same reasons." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. The U-shaped short-run average cost curves are due to the law of diminishing marginal product, but in the long run there are no fixed inputs so the law of diminishing marginal product does not apply. The long-run average cost curve is U-shaped if economies of scale apply at smaller rates of output and diseconomies of scale apply at larger rates of output.
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Which of the following will NOT reduce the actual money multiplier?
a) Banks keeping some excess reserves. b) Consumers keeping money on hand for transactions. c) An increase in reserve requirements. d) A certain bank being loaned up.
If quality-detection costs are very low,
a. lower quality products will tend to be outcompeted in the market, and the average quality will rise. b. lower quality products will tend to be outcompeted in the market, but the average quality will fall. c. higher quality products will tend to be outcompeted in the market, and the average quality will rise. d. higher quality products will tend to be outcompeted in the market, and the average quality will fall.