Which of the following statements concerning the long-run average cost (LRAC) curve is correct?
A) The LRAC curve represents the least-cost input combination of inputs for producing each level of output.
B) The LRAC curve is derived from a series of short-run marginal cost curves.
C) The short-run cost curve at the minimum point of the LRAC curve represents the least-cost plant size for all levels of output.
D) As output increases, the amount of capital employed by the firm is held constant along the LRAC curve.
A
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A cost that arises from the production or consumption that falls on someone other than the producer or consumer is called
A) a negative benefit. B) a public choice impact. C) a positive externality. D) a negative externality. E) a private good.
The best explanation of why the aggregate demand curve has a negative slope is that
A) at a higher price level households cut back on their spending on goods and services. B) at a higher price level business firms wish to produce more goods and services. C) a higher price level results in lower real balances and a higher real interest rate. D) a higher price level results in less government spending on transfers, such as unemployment insurance and social security payments.