In Defining a Firm's Long-Run Average Cost Curve

question 104

Multiple Choice

In defining a firm's long-run average cost curve,

• A)factor prices are held constant and technology is assumed to change.
• B)factor prices are held constant and the quantity of factors of production used is varied.
• C)factor prices are varied and the quantity of factors of production is held constant.
• D)technology,factor prices,and the quantity of factors of production are all varied.
• E)the time period must be longer than one year.

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Definitions:

Aggregate Supply Model

An economic model that represents the total supply of goods and services that firms in an economy plan on selling during a specific time period, across all price levels.

Phillips Curve

An economic theory suggesting an inverse relationship between the rate of inflation and the rate of unemployment in an economy.

Long-Run Phillips Curves

A graphical representation showing that in the long run, there is no trade-off between inflation and unemployment.

Natural Rate

The level of economic activity or output at which the economy operates without causing inflation to accelerate, often associated with unemployment or interest rates.