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:

Efficient Market Hypothesis

A financial theory stating that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns than the overall market.

Technical Analysis

An approach to assess securities through the examination of statistical data derived from market behavior, including historical prices and trading volumes.

Fundamental Analysis

Fundamental analysis involves assessing a company's financial statements and health, its management and competitive advantages, and its competitors and markets to determine its stock's value.

Preferred Stock

A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock, typically with fixed dividends and no voting rights.