Table 13-14 Listed in the Table Are the Long-Run Total Costs for Costs

question 427

Multiple Choice

Table 13-14
Listed in the table are the long-run total costs for three different firms.

-Refer to Table 13-14.Which firm is experiencing constant returns to scale?

• A) Firm A only
• B) Firm B only
• C) Firm C only
• D) Firm A and Firm B only

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Definitions:

Allocative Efficiency

A state of the economy in which production is in accordance with consumer preferences; every good or service is produced up to the point where the last unit provides a utility to consumers equal to the cost of producing it.

Consumer Surplus

The difference in the amount consumers are prepared and have the means to pay for a service or good compared to the amount they actually do pay.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, often depicted as the area above the supply curve and below the market price.

Average Cost

The total cost of production divided by the number of goods produced; also known as per unit cost.