17. The minimum points of the average variable cost and average total cost curve

Question

17. The minimum points of the average variable cost and average total cost curves occur where a. the marginal cost curve lies below the average variable cost and average total cost curves. b. the marginal cost curve intersects those curves. c. the average variable cost and average total cost curves intersect d. the slope of total cost is the smallest 1s. When, for a firm, long-run average total cost decreases as the quantity of output increases, we ha eases as the quantity of output increases, we have a situation a. economies of scale b. diseconomies of scale c. coordination problems arising from the large size of the firm d. fixed costs greatly exceeding variable costs. 19. Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that a. consumers are boycotting local retailers whose prices are relatively higher. b. there are diseconomies of scale in retail sales c. there are economies of scale in retail sales. d. there are diminishing returns to producing and selling retail goods. 20. Some reasons that firms may experience diseconomies of scale include that a. the firm is too small to take advantage of specialization b. large management structures may be bureaucratic and inefficient. c. if there are too many employees, the work place becomes crowded and people become less productive d. average fixed costs begin to rise again. 21. If a firm experiences diseconomies of scale at all output levels, then its long-run average total cost curve would a. slope downward. b. be horizontal. c. slope upward. d. slope downward for low output levels and upward for high output levels. 22. If a firm experiences economies of scale at all output levels, then its long-run average total cost curve would a. slope downward. b. be horizontal. c. slope upward. d. slope downward for low output levels and upward for high output levels. 23. Company X is the largest auto company in the United States, selling over 200,000 cars a month. Its averag has been generally higher than its competitors due to high management and administrative cost. It recently has a lost touch with the market trend, thus leading to loss of market shares to competitors. As a result, it incurring increasingly higher customer acquisition cost. Which of the following most accurately illustrates t situation at Company X? e cost lso a. b. c. Company X demonstrates economies of scale Company X demonstrates diseconomies of scale Company X demonstrates constant returns to scale

Explanation / Answer

17 b marginal cost intersects those curves at their lowest point

18 D fixed costs greatly exceeding variable costs. Is not economies of scale because that will shift curve

19 c there are economies of scale in retail

20 b large management structure may be beurucratic

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