If Large Fixed Costs Result in ATC Falling as Output

question 200

Multiple Choice

If large fixed costs result in ATC falling as output increases, this industry is referred to as a:

• A)constant-cost industry.
• B)natural monopoly.
• C)network externality.
• D)profit-maximizer.

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Definitions:

Price of Good

The monetary value assigned to a product or service, determined by various factors including production costs, supply and demand, and competition.

Giffen Good

A product that people consume more of as the price rises, violating the basic law of demand.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods or services.

Indifference Curve

A chart illustrating diverse pairings of two items that offer the same level of contentment and usefulness to a shopper.