Suppose a Firm Experiences Decreasing Returns to Scale

question 60

Multiple Choice

Suppose a firm experiences decreasing returns to scale. This is shown graphically by

• A) a downward- sloping long- run marginal- cost curve.
• B) a downward- sloping long- run average cost curve.
• C) a horizontal long- run average cost curve.
• D) an upward- sloping long- run average cost curve.
• E) an increasing marginal product curve.

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Definitions:

Diagnosis

The identification of the nature of an illness or other problem through examination of the symptoms and sometimes involving diagnostic tests.

Anchoring Effect

A cognitive bias where individuals rely too heavily on an initial piece of information (the "anchor") when making decisions.

Base Rate Fallacy

A cognitive bias where individuals misjudge the likelihood of an event due to ignoring general statistical information in favor of specific information.

Availability Heuristic

describes a cognitive bias where individuals estimate the likelihood of an event based on how easily examples come to mind.