The Figure Below Shows a Family of Cost Curves for a Firm.The

question 110

Multiple Choice

The figure below shows a family of cost curves for a firm.The subscripts 1,2,and 3 for the SRATC curves refer to different plant sizes.
FIGURE 8- 3
-Refer to Figure 8- 3.What is the difference between the SRATC curves and the LRAC curve?

• A)The LRAC is an envelope curve,joining the minimum points on all SRATC curves.
• B)The SRATC curves show diseconomies of scales,whereas the LRAC curve shows economies of scale.
• C)The SRATC curves show the lowest attainable cost of production at each level of output when all factors are variable in the short run,whereas the LRAC curve shows the same in the long run.
• D)For the SRATC curves,one or more of the factors of production is fixed,whereas for the LRAC curve,all factors of production are variable.
• E)The SRATC curves show the optimal plant size when all factors of production are variable,whereas the LRAC shows the lowest cost attainable associated with each LRAC curve.

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Definitions:

Financial Asset

A financial asset refers to any asset that is cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset from another entity.

Transactions Exposure

The potential for a company's cash flows to be affected by changes in exchange rates due to transactions in foreign currencies.

Financial Risk

Financial risk involves the possibility that a company's cash flow will not be sufficient to meet its obligations, which can result from volatility in the markets, business operations, or creditworthiness.

Commodity Swap

A financial agreement where two parties exchange cash flows related to a specific commodity's price.