The Long-Run Average Total Cost Curve

question 186

Multiple Choice

The long-run average total cost curve

• A) is an envelope-shaped curve mapped out by the short-run average total cost curves for alternative plant sizes.
• B) intersects the minimum point of each short-run average total cost curve for alternative plant sizes.
• C) rises throughout its entire range when increasing returns are present.
• D) falls throughout its entire range due to the law of diminishing returns.

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Definitions:

First-In, First-Out

An inventory valuation method where the oldest items are sold or used first.

Equivalent Units

A concept in cost accounting used to assess work-in-process inventory by converting partial units into a number of equivalent full units.

Ending Inventory

The worth of merchandise ready for purchase at the close of a financial period, determined by adding purchases to the initial inventory and then subtracting the cost of goods that were sold.

First-In, First-Out Method

An inventory valuation method where the earliest items added to inventory are the first ones considered sold.