The Long-Run Average Total Cost Curve

question 427

Multiple Choice

The long-run average total cost curve

• A)displays declining unit costs so long as output is increasing.
• B)indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.
• C)has a shape that is the inverse of the law of diminishing returns.
• D)can be derived by summing horizontally the average total cost curves of all firms in an industry.

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Definitions:

Cost Of Goods Sold

The particular expenses associated with generating the goods a business sells, covering labor and materials.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Manufacturing Company

An enterprise engaged in the transformation of raw materials or parts into finished goods through the use of labor, machines, tools, and chemical or biological processing or formulation.

Gross Margin

The difference between revenue and cost of goods sold, divided by revenue, representing the percentage of each dollar of revenue that the company retains as gross profit.