(1) Which of the following is NOT true when there are large economies of scale s
ID: 1173863 • Letter: #
Question
(1) Which of the following is NOT true when there are large economies of scale such that one firm can produce at a lower average cost than can be achieved by multiple firms?:
A) The long-run average cost curve of the firm will increase at a low level of output. B) This situation produces a natural monopoly. C) Proportional increases in output yield proportionally small increases in total cost. D) There will only be one firm in this industry
(2) In the short run, a firm should shut down when:
A) P < AVC. B) MR > MC. C) MR = ATC. D) P > MC.
(3)When marginal costs are rising:
A) average physical product is falling. B) average physical product is rising. C) marginal physical product is also rising. D) marginal physical product is falling.
(4)Refer to the below figure. Profits for this firm are equal to zero:
A) only at points B and C. B) for points between B and C. C) for all points less than B and greater than C. D) only for all points less than B.
Explanation / Answer
a) "A"
IN the long run, the average cost curve of the firm will stay low as the production of the firm increases. The first statement is wrong.
b) "A"
When the price is lower than the average variable cost that means the firm can't even take out the actual cost they are using to produce the goods that will be the shutdown cost.
c) "C"
When the marginal cost will raise the marginal physical product will also rise.
d) "A"
Only at point B and C. Below B and after C there is loss and a negative profit.
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