Which of the following statements regarding a firm's long-run average total cost (LRATC) curve and its short-run average total cost (SRATC) curve is true?
A) The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed.
B) The contribution of average fixed cost to LRATC is greater than its contribution to SRATC.
C) The shape of the LRATC is affected by the law of diminishing returns.
D) The SRATC, but not the LRATC, can be used by a firm's managers for planning.
A
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A firm in monopolistic competition that is maximizing profit ________
A. always makes a positive economic profit in the short run B. never needs to shut down because its price always exceeds minimum average variable cost C. might, in the short run, sell at a price that is less than average total cost D. shuts down temporarily if it incurs a loss equal to total variable cost
Consider a two-country, two-commodity model. The table below shows the units of Good X and Good Y produced in Country A and Country B per labor hour. If Country A transfers one labor hour from the production of Good Y to the production of Good X, total world production of Good X will ________ by ________ unit(s). ProductivityCountry ACountry BGood X1.000.50Good Y0.200.70
A. decrease; 0.7 B. increase; 0.5 C. increase; one D. decrease; 1.43