A Firm's Long- Run Average Cost Curve

question 88

Multiple Choice

A firm's long- run average cost curve

• A) shows the relationship between marginal cost and output given that the economically most efficient method of production is employed.
• B) is an envelope of short- run average variable cost curves.
• C) shows the minimum cost of producing each possible level of output with a fixed factor.
• D) is the boundary between attainable and unattainable cost levels, with known production technologies and given factor prices.
• E) is horizontal in most situations..

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Definitions:

Rate of Return

The increase or decrease in value of an investment during a set timeframe, shown as a percent of the investment's original price.

Accelerated Depreciation

A method of depreciation in which an asset loses value faster in the initial years of its useful life, with decreased amounts in later years.

Net Present Value

A method of evaluating investments by calculating the present value of future cash flows minus the initial investment cost, used to assess the profitability of an investment.

Cash Inflows

Money received by a business from its operational, investment, and financing activities.