A Firm's Short-Run Average Cost Curve Is U-Shaped

question 61

Multiple Choice

A firm's short-run average cost curve is U-shaped. Which of these conclusions can be reached regarding the firm's returns to scale?

• A) The firm experiences increasing returns to scale.
• B) The firm experiences increasing, constant, and decreasing returns in that order.
• C) The firm experiences first decreasing, then increasing returns to scale.
• D) The short-run average cost curve reveals nothing regarding returns to scale.

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Definitions:

Social Loafing

The event where group members apply lesser effort to reach a goal than they would if they were working solo.

Accountable

Being responsible or answerable for actions or decisions, implying a willingness to accept and report on the outcomes of one's actions or decisions.

Dispensable

Capable of being dispensed with; not essential or necessary.

Social Loafing

When part of a team, individuals often show a decrease in effort towards goal completion as opposed to their solo endeavors.