(Figure: Long-Run and Short-Run Average Cost Curves)Use Figure: Long-Run and Short-Run

question 245

Multiple Choice

(Figure: Long-Run and Short-Run Average Cost Curves) Use Figure: Long-Run and Short-Run Average Cost Curves.If a firm is producing at point C on the ATC₂ but anticipates increasing output to 225,000 units in the long run,the firm will build a _____ plant and have _____ of scale.

• A)smaller;economies
• B)smaller;diseconomies
• C)bigger;economies
• D)bigger;diseconomies

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Definitions:

Deflation

A decrease in the general price level of goods and services in an economy over a period of time, potentially leading to increased unemployment and slower economic growth.

Inflation

The pace of ascent in the general pricing for goods and services, eroding the capability to buy.

Expansionary Gap

A situation where the actual output in an economy exceeds the potential output, typically leading to inflation.

Coordination

The process of organizing people or groups so that they work together properly and well.