In the Short Run, a Firm Using Variable Labor and Fixed

question 304

Multiple Choice

In the short run, a firm using variable labor and fixed capital inputs achieves the ________ level of output at the minimum point on its average total cost curve.

• A) efficient
• B) highest cost
• C) least efficient
• D) only possible

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Definitions:

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits that could have been received if a different decision were made.

External Cost

An external cost, or negative externality, refers to a cost that a transaction or activity imposes on parties who are not involved in the transaction, such as pollution affecting non-participants.

Positive Externality

A benefit that affects someone who did not choose to incur that benefit, often leading to an under-provision of a good or service.

Vaccination

A medical intervention that introduces a substance to stimulate the body's immune response against disease.