Suppose a Firm's Production Technology Exhibits Constant Returns to Scale

question 41

Multiple Choice

Suppose a firm's production technology exhibits constant returns to scale. The firm's long-run average cost curve will:

• A)be U-shaped
• B)exhibit economies of scale.
• C)exhibit diseconomies of scale.
• D)be a horizontal straight line.

Recognize the conditions and strategies for price discrimination by monopolists.

Compare the economic outcomes of firms in perfectly competitive markets versus those in monopoly markets.

Understand the concept of barriers to entry and its impact on market structures.

Assess the role of public ownership and regulation in controlling monopoly power and protecting welfare.

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Definitions:

Units-Of-Production Depreciation

A depreciation method that allocates an asset's cost based on its usage, such as units produced or hours operated.

Net Income

The total revenue of a business minus total expenses, indicating the profit earned over a specific period.

Depreciation Method

A systematic approach used to allocate the cost of a tangible asset over its useful life.

Double Declining-Balance

An accelerated method of depreciation which doubles the normal depreciation rate, reducing the value of an asset more quickly in its early years.