The Diagram Shows the Short-Run Average Total Cost Curves for Five

question 137

Multiple Choice

The diagram shows the short-run average total cost curves for five different plant sizes of a firm. The position of these five curves in relation to one another reflects

• A)economies and diseconomies of scale.
• B)the effect of fixed costs on ATC as output increases.
• C)the law of constant costs.
• D)the law of diminishing returns.

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Definitions:

Existing Monopolies

Firms that have exclusive control over a market or product, allowing them to set prices higher than in competitive markets due to a lack of alternatives.

Interest-Rate Cost

The expense associated with borrowing funds, expressed as a percentage of the total borrowed amount.

R&D Expenditure

Financial spending devoted to research and development activities by a company or organization.

Imitation

The action of using someone or something as a model and trying to replicate or emulate their behavior, process, or product.